
IV.„ 



/2 



CopyrighiJ^. 



COPYRIGHT DEPOSn^ 



ECONOMICS 

A Text Book 

FOR THE USE OF 

HIGH SCHOOLS, COLLEGES 
AND UNIVERSITIES 

WRITTEN BY 

Wts. SMITH, C.E. 

A Graduate of Wyoming Seminary, Kingston, Pennsylvania 
A Graduate of Lehigh University 

Author of 

CAPITAL AND LABOR, THE STORY OF 

CIVILIZATION, THE DON QUIXOTE 

OF THE TWENTIETH CENTURY 



BOSTON 

THE ROXBURGH PUBLISHING COMPANY 

INC. 



,-5 6 



Copyrighted 1918 

By W. S. Smith, C. E. 

Rights Reserved 



« > * 



24 1918 



©CI.A499130 






CONTENTS 



PART ONE 

Natural Conditions 
Chap. Page 

Introduction 

I Natural Laws 11 

II Economic Laws 27 

III Production 35 

IV Distribution 45 

V Consumption 53 

VI Compensation 61 

VII Valuation 68 

PART TWO 

Engineering Conditions 

VIII Investments in Natural Products 75 

IX Interest in Commercial Products 86 

X Financial Investments 94 

XI Intellectual Investments 109 

PART THREE 

Social Conditions 

XII Governments; Their Origin and 

Functions 119 

XIII Taxation 134 

XIV Wage Earners 154 

XV Insurance 172 

XVI Scientific Management 181 

XVII Panics, Strikes and Wars 194 

XVIII Conclusion 210 



INTRODUCTION 



The old adage was: — "That man is the 
architect of his own fortune." Today, hu- 
manity is dragged down by unseen and in 
many cases, unknown forces. The object of 
this book is to discuss these forces so that 
people may have a better understanding of 
the conditions that surround them, in their 
every day life. 

The Author W. S. S. 



PART I. 

Natural Conditions 



CHAPTER ONE. 
Natural Laws. 

Definition : — Economics is the condition of 
procuring the greatest returns with the least 
expenditure of time, energy, material or 
finance. 

The world can be divided into three great 
divisions or fields. First, the division or field 
where nature is all powerful. Second, the 
division or field where man and nature works 
together. Third, the division or field where 
man works independently of nature. A sim- 
ple illustration of the division where nature is 
all powerful is the weather. Humanity is 
constantly affected more or less by the 
weather, yet no person can control the 
weather. A simple illustration of the division 
or field where humanity and nature work to- 
ll 



Economics 

gether is the steam engine. Humanity makes 
the engine and nature furnishes the force to 
drive the engine. A simple illustration of the 
division or field where humanity works inde- 
pendently of nature is governments or war. 
Humanity may have strong or weak govern- 
ments; much government or no government. 
The people, in one part of the world, may try 
to kill the people in another part of the world 
by calling it war, or all the people may live 
together in harmony. From observation we 
see that nature makes no interference in these 
workings of humanity. 

In our present study we will consider the 
natural conditions over which humanity has 
no control, as Natural Conditions; the condi- 
tions where man and nature work together as 
engineering conditions; the condition where 
man, and not nature, controls as sociological 

12 



Economics 

conditions. Since Economics is to treat of 
the natural conditions, the first step will be 
the study of natural conditions. In this study 
of natural conditions we will bring to our aid 
the use of mathematics. First we will use 
Geometry. 

Taking a plane surface. Beginning with a 
point and expanding symmetrically over a 
surface gives the circle. The area of this fig- 
ure is determined with one dimension, the 
radius or its double, the diameter, together 
with a constant. Pass two lines through the 
point and complete the figure with parallel 
lines gives the square or parallelogram. The 
area of this figure is determined by using two 
dimensions, the length and the breadth. Con- 
necting two adjacent sides of the square or 
parallelogram with a third side gives the tri- 
angle. The area of this figure is determined 

13 



Economics 

by using the base and half the altitude. The 
■altitude of a triangle is determined by calling 
a portion of the base M. the leg of the tri- 
angle R. and the hypothenuse of the triangle 
A. This gives the equation A^— R^i^M^, 
thus using three dimensions. The triangle 
reduces to a polygon. The area of this figure 
is determined by using the perimeter of the 
base and one-half the radius of the inscribed 
circle. Using the method explained for de- 
termining the altitude of the triangle, to de- 
termine the radius of the inscribed circle, and 
combining these three dimensions with the 
perimeter, gives the four dimensions neces- 
sary to calculate the area of the polygon. 
Likewise the polygon can be developed di- 
rectly from the square or parallelogram. In- 
creasing the number of sides of the polygon 
indefinitely, the limit is the circumference of 

14 



Economics 

a circle. Decreasing the radius and perimeter 
of the circle to its limit gives a point, thus 
completing the cycle. 

Taking the solids. Take a point and expand 
symmetrically in every direction gives the 
sphere. The volume of this solid is deter- 
mined by one dimension, the radius or its 
double, the diameter, together with a constant. 
By truncating the sphere a cylinder may be 
formed. The volume of this solid is deter- 
mined by two dimensions, the radius, or its 
double, the diameter, times the altitude 
together with a constant. Pass four parallel 
intersecting planes through the cylinder 
gives the cube or parallelopiped. The 
volume of this solid is determined by using 
the three dimensions, length, breadth and alti- 
tude. Connecting two adjacent planes of the 
cube or parallelopiped with a third plane gives 

15 



Economics 

the prism. The volume of this soHd is the area 
of the base times the altitude. As previously 
explained the base being a triangle requires 
three dimensions to determine its area. Com- 
bining these three dimensions with the altitude 
gives four dimensions. The prism can be 
reduced to a triangular pyramid. The volume 
of this solid is the area of the base times one 
third the altitude. This solid has six dimen- 
sions, both the altitude of the pyramid and 
the altitude of the base forming separate tri- 
angles. The triangular pyramid reduces to a 
pyramid with a polyagonal base. But, this in 
turn has but six dimensions as the radius of 
the inscribed circle occurs in the polygon and 
again in the altitude. The cube or parallel- 
opiped can be changed directly into a pyramid 
with a rectangular base. To determine the 
volume of this solid requires five dimensions. 

16 



Economics 

Two dimensions to determine the area of the 
base and three dimensions to determine the 
altitude. A pyramid with a rectangular base 
changes readily into a pyramid with a polya- 
gonal base. This solid has six dimensions as 
previously explained. A pyramid with a poly- 
agonal base reduces readily to a cone, a solid 
with three dimensions. The radius or diam- 
eter of the base, the altitude and the slant 
height. By truncating the cone, a cylinder 
may be produced. The volume of this solid 
is formed by using two dimensions as previ- 
ously explained. The cylinder reduces to a 
sphere, or solid of but one dimension. Re- 
ducing the radius and surface of a sphere to 
its limit gives a point, thus completing the 
cycle. 

If followed through the triangle, the law 
shows the plane figures increasing continu- 

17 



Economics 

ally from a figure, the circle, having but one 
dimension, to a figure, the polygon, having 
four dimensions. If the law is followed 
directly through the square or parallelogram 
to the polygon, no figure is produced having 
three dimensions. 

In the solids, the law follows continuously 
to the prism, a solid having four dimensions. 
If the prism is changed to a triangular pyra- 
mid, and the triangular pyramid is changed 
to a polyagonal pyramid, no solid is produced 
having five dimensions, but two solids are 
produced having six dimensions. If the cube 
or parallelopiped is reduced to a pyramid, no 
solid is produced having four dimensions. 
The law passes from a solid of three dimen- 
sions to a solid of five dimensions and then to 
a solid of six dimensions. After reaching a 
solid of six dimensions, the polyagonal pyra- 

18 



Economics 

mids, the law drops directly to a solid, the 
cone, having but three dimensions. The law 
then reduces directly through the cylinder, a 
solid with two dimensions, to a sphere, a solid 
with but one dimension. 

Thus with the aid of mathematics, we see 
that the laws of nature do not develop uni- 
formly in all cases. Call each dimension a 
function. In both the plane and solid figures, 
the law branches and reaches the same limit 
by two routes. After passing its limit, both 
the plane and solid figures lose three func- 
tions. While we may not be able to locate 
just where the change takes place, at some 
point the polygon ceases to be a polygon and 
becomes a circle. In the same manner the 
pyramid ceases to be a pyramid and becomes 
a cone. Whenever that change takes place, 
the figures cease to exist in their former state. 

19 



Economics 

x\s we proceed with our study, we will find 
other laws of nature that are affected in a 
similar manner. 

Different Natural Laws. 

Plants remain permanently in one place 
during the term of their natural lives while 
animals roam from place to place. Hence, 
the vegetable kingdom affords the better 
opportunities for the study of natural laws. 
In the vegetable kingdom any person can 
easily observe three conditions. First, the 
condition where the seed matures, but the 
stem dies and the root dies., This condition 
is readily seen by observing the grains, wheat, 
rye, corn, etc. Second, the condition where 
the seed matures, the stem dies, but the root 
lives. This condition is readily seen by observ- 

20 



Economics 

ing the grasses, clover, timothy, blue grass, 
etc. Third, the condition where the seed ma- 
tures, but the stem lives and the root lives. 
This condition is readily seen by observing 
the trees, oak, chestnut, beech, hickory, etc. 
As yet we are unable to prove why a grain 
of wheat will not grow into an oak tree or 
why an acorn will not grow into a stalk of 
wheat. At the present time we are compelled 
to accept these facts as axioms. The facts 
show conclusively that the laws of nature are 
different. That is, the results of nature, that 
we see around us, are produced by the work- 
ings of different natural laws. Hence, we 
would not be justified in trying to harmonize 
all natural phenomenon as being produced by 
one great natural law. 



21 



Economics 
Varying Natural Laws. 

We may see men laying one brick upon 
another brick, thus producing a wall. Or 
reversing the process, taking away brick after 
brick will destroy the wall. Another condi- 
tion, not so easily observed, is the placing of 
one force against another force to produce the 
balance. A fine illustration of this principle 
is the working of a pair of scales. 

These three observations give us the three 
great principles of mathematics, namely, 
building up; tearing down; and the balance. 
Building up is represented by addition and 
multiplication. Tearing down is represented 
by subtraction and divison; the balance being 
represented by the equation in Algebra. In 
ordinary business transactions, quantities are 
considered as fixed. The grocer's pound, the 

22 



Economics 

steelman's ton and the engineer's foot, are all 
definite fixed quantities. Let us consider a 
railroad train as passing from a point A. to a 
point B. The distance from A. to B. remains 
constant, but while the train is in motion, the 
distance of the train from either A or B is 
constantly varying. 

Quite recently mathematicians have discov- 
ered that there are two kinds of varying quan- 
tities. The sides of a triangle vary but the 
ratio of variation is constant. This gives us 
the tables of Trignometric functions used by 
engineers and architects. The second kind of 
varying quantities seem to be more perplex- 
ing and more difficult to comprehend ; that, in 
which the quantities vary and the ratio varies. 
So difficult to comprehend and so perplexing 
are the workings of this varying quantity, 
that for the present, we will content ourselves 

23 



Economics 

by merely proving that such a condition really 
exists. As an illustration of this varying con- 
dition we will consider a young lady, aged 
twenty, who contemplates marrying a man 
aged forty. The young lady demurs and a 
sympathetic friend takes her to task. The 
young lady says, 'To tell the truth he is too 
old." "But," says the friend, "he is only 
twice as old as you are." "That," says the 
young lady, "Is just what is worrying me, for 
when I am forty he will be eighty." A mo- 
iiient's consideration will show us the fallacy 
of the young lady's arithmetic. 

For the sake of argument, let us consider 
that they marry. When the wife is one sec- 
ond old the ratio of their ages is one to 
631,065,600. When the wife is one hour old 
the ratio of their ages is one to 175,296. When 
the wife is one day old, the ratio of their ages 

24 



Economics 

is one to 7304. When the wife is one year 
old, the husband is twenty-one years old and 
the ratio of their ages is one to twenty-one. 
When the wife is five years old, the husband 
is twenty-five years old and the ratio of their 
ages is one to five. When the wife is ten 
years old, the husband is thirty years old and 
the ratio of their ages is one to three. When 
the wife is twenty years old the husband is 
forty years old and the ratio of their ages is 
one to two. 

By increasing their ages indefinitely, the 
ratio between their ages can be made less than 
•any assigned quantity, however small, but the 
ratio can never become zero, since the differ- 
ence in their ages is always twenty years. 
This condition gives us an idea of the differ- 
ential of calculus. 

From what has preceded we are able to 

25 



Economics 

draw three conclusions. First, the laws of 
nature branch and may overlap each other. 
Second, the laws of nature are different. 
Third, the laws of nature vary. 



Economics 



CHAPTER 11. 
Economic Laws. 

In order to supply the various needs of the 
human race, supplies are drawn from the 
mineral, the animal and the vegetable king- 
doms. In many cases, the conditions are so 
closely interwoven that it is a difficult task to 
distinguish where one condition ends and an- 
other condition begins. In its broader sense 
all operations will come under either one of 
three general divisions. Either, the material 
is used as nature produces it. One kind of 
material is transformed into another kind of 
material, or, certain kinds of material are 
used to produce certain other kinds of ma- 
terial. 

27 



Economics 

First, the material is used just as nature 
furnishes it. Under this condition we are 
only allowed to use the amount of material 
that nature furnishes. In the case of miner- 
als, we may mine and use them until the sup- 
ply is exhausted. After the supply is ex- 
hausted all mining operations and likewise 
all using operations must cease. The same 
conditions apply to any article that we may 
possess whether it be food supplies, building 
material, finances or any other article. We 
can only use of that article until the supply 
is exhausted. This condition gives us our 
first Economic Law which we will designate 
as the Economic Law of Material or the Eco- 
nomic Law of Decreasing Returns. 

In the second condition, we may possess an 
article and wish to transform that article into 
some other article. As an illustration, the 

28 



Economics 

farmer may have grain and hay which he 
transforms into pork, beef or mutton. The 
mechanic may transform coal into steam or 
transform a water fall into electricity. The 
financier may transform money into roads, 
cities, factories, etc. This condition gives us 
our second Economic Law, which we will 
designate as The Economic Law of Transfor- 
mation or the Economic Law of Constant 
Returns. 

In the third condition, we may desire arti- 
cles that nature will not produce unless as- 
sisted by man. We desire grain for food and 
in order to procure grain man must prepare 
the soil and sow the seed. We desire steel for 
building material and in order to procure steel 
man must place together, in a heated furnace, 
iron ore, coal or coke, limestone, etc. This 
condition gives us our third Economic Law 

29 



Economics 

which we will designate as the Economic Law 
of Production or the Economic Law of In- 
creasing Returns. 

In our every day lives, we see some people 
constantly engaged in tilling the soil; other 
people constantly engaged in building opera- 
tions; other people constantly engaged in fi- 
nancial operations ; and still other people con- 
stantly engaged in intellectual work. If we try 
to harmonize these various conditions into one 
great natural law, we simply end in confusion. 

Probably the one condition that has puzzled 
economists of the past, more than anything 
else, is the fact that in economics two sets of 
natural laws cross each other at right angles. 
One set of laws splits into four branches which 
we will designate as Natural, Commercial, Fi- 
nancial and Intellectual. These four branches 
are crossed at right angles by three Economic 

30 



Economics 

Laws. The Law of Material or the Law of 
Decreasing Returns ; the Law of Transforma- 
tion or the Law of Constant Returns ; and the 
Law of Production or the Law of Increasing 
Returns. 

To complicate matters still more the laws 
overlap in the professions. A successful 
farmer must be a fairly good doctor because 
he is constantly called upon to care for the 
very young and give first aid to the injured. 
A successful doctor must be an expert farmer 
because he is constantly called upon to pre- 
scribe special foods for his patients and he 
must know whether or not his patients are 
getting the food he prescribes. An engineer 
must be a good financier. He must not only 
be able to design and superintend the erection 
of difficult engineering structures but he must 
know, in advance, about how much these 

31 



Economics 

structures will cost and about how much they 
will earn when the project is put in operation. 
A financier must be a good engineer to know 
whether or not it is safe to invest in certain 
projects. Lawyers and ministers are brought 
into contact with all phases of life and busi- 
ness. In many cases a business will overlap. 
That is, some transactions will occur in one 
economic section while other transactions will 
occur in a different economic section. In 
order to properly classify a business transac- 
tion, economically, it is necessary to consider 
the element of time. 

In the Economic Law of Material or the 
Economic Law of Decreasing Returns, the 
element of time has no effect upon the trans- 
action. Johnnie may eat all his cake today, or, 
he may save part of it until tomorow. As far 
as natural laws are concerned a person may 

32 



Economics 

hunt or fish at any time. As far as the ditch 
is concerned, a laborer may dig it today, to- 
morrow, next day or next year. As far as the 
letter is concerned it may be written in the 
forenoon or the afternoon. The letter can be 
advanced or delayed to conform to the desires 
of the writer. In any of these transactions the 
element of time does not affect the final result 
or the finished product. 

In the second Economic Law, the Law of 
Transformation or the Law of Constant Re- 
turns, the element of time is either periodical 
or intermittent. The stock-raiser collects the 
products of his flocks and herds at certain 
periods of the day or certain seasons of the 
year. The machine runner either runs his 
machine according to a schedule or for certain 
periods each day. The merchant and banker 
conduct their business only during certain 

33 



Economics 

hours of the day, while the teacher is only 
employed for certain hours of the day on cer- 
tain days of the week and during certain sea- 
sons of the year. 

In the Economic Law of Production or the 
Economic Law of Increasing Returns, the ele- 
ment of time is continuous. The farmer's 
crop occupies the land continuously from the 
time the crop is planted until the time the crop 
is harvested. The Architect's building occu- 
pies the land continuously from the time the 
building is erected until the building is taken 
down or destroyed. The investment of the 
financier is continuous from the time the first 
payment is made until the entire transaction 
is settled. In finances, a note never takes a 
vacation, and a mortgage never sleeps. In all 
of these transactions the element of time is 
continuous, never relaxing for a second. 

34 






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Economics 

CHAPTER III. 

Production. 

In nature we find three methods of produc- 
tion. Nature collects and stores her surplus 
products as has been done in producing the 
coal, oil and gas fields. Nature produces by 
transforming one product into another product 
as is done by the farmer when he applies fer- 
tilizer to the soil in order to produce the de- 
sired crops. Or, nature produces by means of 
increasing. That is, a grain of corn is placed 
in the soil and nature increases that grain of 
corn to an ear of corn. 

Man, in his various occupations, has fol- 
lowed practically the same three methods. He 
stores certain parts of his production, at least 
temporarily, in warehouses or elevators. He 

35 



Economics 

transforms the wool or cotton into cloth and 
the cloth into clothing. Or, he places together 
certain articles to produce a desired product 
as is done in the manufacture of steel and 
glass. 

Probably the first condition that needs to be 
considered in production is the difference be- 
tween discovery and invention. Discovery 
and invention mark the boundary line between 
nature and man. Some one discovered the 
circle. Some one invented the process of 
dividing the circle into degrees, minutes and 
seconds of arc. In the Law of Decreasing 
Returns or the Law of Material, production 
has always been maintained or increased 
through the medium of discovery. Some one 
discovered that coal will burn and the using of 
coal began. Some one discovered that wheat 
will sustain life and the cultivation of wheat 

36 



Economics 

began. The same conditions hold true for all 
natural products. 

In the second Economic Law, the Law of 
Constant Returns, or the Law of Transforma- 
tion we find both discovery and invention. 
Some one discovered wool and cotton and 
some one invented the process of spinning 
these articles into yarn and weaving the yarn 
into cloth. Observation shows that in the law 
of Transformation, production may be as 
simple as melting snow to produce water or 
as difficult and complex as separating the 
different elements from oil or carving marble 
to produce statuary. 

In some cases production proceeds by a 
succession of steps. The finished product of 
one series being the raw material of the fol- 
lowing series. As an illustration, wheat is 
the finished product of the farmer but the 

37 



Economics 

raw material of the miller. Flour is the fin- 
ished product of the miller but the raw mate- 
rial of the baker. While bread is the finished 
product of the baker but the raw material of 
the housekeeper. 

In the third law, the Law of Increasing 
Returns, we find production carried on en- 
tirely by means of invention. When some 
one discovered that wheat will sustain life, the 
farmer was compelled to avail himself of 
many inventions before bread became a com- 
mercial article of food. 

The discovery that steam will lift the lid 
on a kettle of boiling water led to the inven- 
tion of the steam engine. By means of the 
steam engine heat could be turned into power 
and this led to many other inventions. Cor- 
porations were formed and production began 
on a large scale. Economically, the workings 

38 



Economics 

of corporations are similar to the workings 
of individuals as will be seen by referring to 
the Economic Table. 

Risk. 

Nature clothes a portion of the earth with 
a forest. Lightning starts a fire in the forest 
and the fire consumes the forest. Whether 
this condition could be termed an accident, a 
risk, or is part of a preconceived plan of 
nature, we have no way of proving. In other 
words we are unable to prove whether or not 
nature assumes any risk in her own workings. 

In man's workings with nature, nature re- 
quires man to assume risk. When he shoots 
at game, the hunter risks the charge for his 
weapon. The farmer risks his labor in pre- 
paring the soil and the necessary seed to plant 
the soil, every time he plants a crop. In many 

39 



Economic^ 

cases the manufacturer must risk the value 
of his raw material, fuel, and necessary labor 
in order to secure a desired product. Like- 
wise, the financier is called upon to assume 
many and various kinds of risks. The time 
during which a risk exists, varies. In the case 
of the hunter, he knows in a very few seconds 
whether he has captured his game or wasted 
his ammunition. In the case of the farmer, 
the risk is from seed time to harvest, which 
may be any where from three months 
to ten months. With the aid of intelligence, 
care and experience, the element of risk may 
be reduced to such a point as to be practically 
negligible from an economic standpoint. 
However, we must not lose sight of the fact 
that in all classes of production risk is an 
element that at any time may prove to be a 
serious factor. 

40 



Economics 

Competition. 

The weed that man has tried to destroy, 
springs up and destroys the plant that man 
has tried to cultivate. Whether or not, this 
is a survival of the fittest, from an economical 
stand point, it is certainly not the survival of 
the most valuable. However, it does illustrate 
competition. 

By referring to the Economic Table we see 
that all industries are not governed by the 
same Economic Law. It depends very largely 
on which Economic Law governs an industry 
as to how competition will affect that industry. 
Where nature makes no charge for the pro- 
duct, as in the Law of Decreasing Returns, 
competition does promote more scientific 
methods in production and does decrease 
prices. In the case of mining Companies, 
competition does stimulate production and 

41 



Economics 

does reduce prices. As an illustration, take 
a coal field in which fifty different companies 
are operating. In this case the price of coal 
is always set by the consumer. The consumer 
will purchase from the Company that sells 
coal for the least price. Economically, this 
price represents the cost of producing coal 
under the most adverse circumstances. 
Hence, any competing company who wants a 
profit will be compelled to gain this profit by 
improved methods in mining. 

Companies whose operations come under 
the second Economic Law, that of Constant 
Returns are invariably controlled by outside 
forces. Economically, railroads are controlled 
by the shippers. Hence, competition tends to 
decrease the revenue of the railroad. That 
is, the shipper, invariably, will patronize the 
railroad that will haul his goods for the least 

42 



Economics 

money. If the revenue of the railroad is 
decreased by competition or any other method, 
until there is not sufficient to pay running 
expenses and keep the equipment in running 
order the road will be forced out of business. 
In the Economic Law of Increasing Re- 
turns, economically, the price of the product 
is set by the producer. If the producer is 
hindered in his work by competition it will, 
necessarily, increase the price of the product. 
Since competition increases the price of the 
product to the producer, competition likewise 
increases the price of the product to the con- 
sumer. That is, the steelman puts together 
certain products found in nature and nature 
charges him a certain price for these products. 
If man interferes with nature's work, nature 
charges man for the interference and man 
must pay the bill. Industries, operating under 

43 



Economics 

the law of Increasing Returns, cannot be con- 
trolled by competition. These industries must 
be controlled by some other method. 

In the field of production, we are constantly 
called upon to deal with the problems of 
equipment, power, disposing of valuable by- 
products, etc. Each separate plant develops 
its own set of detail problems. Since these 
problems are different for each plant it seems 
better to leave the solution of these problems 
to the Superintendent or Manager. 



Economics 



CHAPTER IV. 
Distribution. 

Nature's forces for distribution are the 
winds, the streams and the waves of the 
ocean. For many centuries man availed him- 
self of practically the same forces. The 
streams carried his rafts and canoes while the 
winds blew his boats across the ocean. With 
the invention of the railroad and the steam 
ship, the world was brought under the sway 
of mechanical transportation. With the more 
rapid facilities afforded by mechanical trans- 
portation great changes have been brought 
about in the methods of distribution. On a 
modern breakfast table, we may find codfish 
from New Foundland, oranges and bananas 

45 



Economics 

from the tropics, tea from China, or coffee 
from Brazil. This shows, conclusively, that 
the producer and consumer may live in 
different parts of the earth or many miles 
apart. Such being the case, it is only in rare 
or exceptional cases, that the producer and 
consumer deal directly with each other. Be- 
tween the producer and consumer has grown 
the merchant. 

Under present business conditions, the mer- 
chant buys and sells. This condition places 
the merchant in a peculiar economic situation. 
The merchant sells exactly the same goods 
that he buys. In an Economic sense, he 
neither consumes nor produces. This condi- 
tion places his business in the Economic Law 
of Transformation or the Economic Law of 
Constant Returns. But, in his purchases the 
merchant is not able to avail himself of the 

46 



Economics 

Economic Law of Transformation but must 
be governed by the Economic Law of Pro- 
duction. That is, in his purchases, the mer- 
chant has no guarantee that he will ever be 
able to sell any part of the goods he purchases. 
Hence, the risk that the merchant must 
assume, in many cases, is the total amount of 
his purchase. The merchant is likewise ex- 
posed to competition. He is constantly called 
upon to expose his wares for sale, yet the only 
protection the merchant has is the protection 
he provides for himself. The result of this 
method of doing business is: — that the mer- 
chant dominates the entire commercial situa- 
tion. The merchant sets the price for the 
Producer; he sets the price for the Consumer; 
and he sets the amount of his own profit. 
To substantiate this statement, when the 
merchant buys an article the price paid must 

47 



Economics 

suit the merchant, otherwise the merchant will 
not buy the article. When the merchant sells 
an article, the selling price must suit the 
merchant, otherwise the merchant will not 
sell the article. The profit, on an article, 
represents the difference between the cost 
price and the selling price. Since the mer- 
chant fixes both the cost price and the selling 
price, he at the same time fixes his own profit. 
This method of doing business is unfair to 
every one. It is unfair to the producer, for 
he has nothing to say in regard to the value of 
his produce. The method is unfair to the 
merchant on account of the risk he is called 
upon to assume. When a merchant b'uys 
goods, he has no guarantee that he will ever 
be able to sell these goods to any person, at 
any price. The method is unfair to the con- 
sumer for it does not allow the consumer to 

48 



Economics 

use any intelligence with regard to his pur- 
chases. With the consumer it is simply a 
case of; pay the merchant's price and take 
the article; or, refuse to pay the merchant's 
price and leave the article. Under existing 
conditions this is probably the best arrange- 
ment that can be made. The question is how 
to change the conditions? 

The farmer, the merchant, the manufac- 
turer and various other people are taxed to 
maintain the public schools. The public 
Schools are maintained, exclusively, for edu- 
cating the rising generation. Is it not a fair 
equation, that since the public has assisted the 
child to an education, the public has the right 
to require the child to use that education in 
order to determine its own wants ? Instead of 
the public going to the store and seeing what 
they can get and what the merchant has, how 

49 



Economics 

would it be for the public to go to the store 
and tell the merchant what they want? 

With such an arrangement, what would be 
the order of business? It would be necessary 
for the consumer to place orders at least a 
week, in advance. The merchant having his 
orders could employ his help to a better ad- 
vantage. Under the present arrangement the 
merchant must have sufficient help to take 
care of his business during his busiest period; 
at other times there is little that this help can 
do. If he has his orders, in advance, he can 
employ his force continuously until his orders 
are filled. If he works on a commission, he 
need have none of his own capital invested, 
consequently he assumes no risk, and has no 
interest to pay on capital that is not working. 
If he simply buys and sells his business con- 
trols him. He may not be able to sell when 

50 



Economics 

his business demands that he should sell. If 
he acts as a commission man, he simpy orders 
from the producer the amount the consumer 
orders from him, consequently he controls his 
business. 

With the producer, the commission form of 
business renders production more flexible. 
The producer may devote special efforts to 
producing certain kinds of goods or a com- 
mission man secure markets for goods that 
a merchant would refuse to buy. In buying 
and selling, either perishable or non-perishable 
goods, the merchant must assume a tremen- 
dous financial risk. In the case of perishable 
goods, the goods soon become unfit for use 
and may mean a total loss, financially. In 
the case of non-perishable goods, if the dry 
goods merchant turns his entire capital once 
every one hundred days then each day he 

51 



Economics 

turns one percent of his capital. Hence, the 
profit, on one percent of his investment must 
be sufficient to pay his entire daily expenses 
and the interest on ninety-nine percent of his 
capital that is lying idle. If his customers 
order in advance and he simply fills their 
orders he need have no fixed capital invested, 
consequently he has no interest to pay. 

In buying and selling the merchant does 
all the advertising. In a commission form of 
business, it would not be necessary for the 
commission man to do any advertising. The 
advertising would all be done by the producer 
and the consumer. In a commission form of 
business, undoubtedly it would be necessary 
to place the commission man under bond and 
perhaps require him to secure a government 
license. 



32 



Economics 



CHAPTER V. 
Consumption. 

Distribution and consumption are so closely 
allied as to be almost inseparable. While giv- 
ing, trading, buying and selling might be con- 
sidered as 'a part of distribution, we will 
consider these conditions as a part of con- 
sumption. When the savage hunter succeeded 
in slaying a large animal, especially during 
the warm season, personally he could only 
consume a small portion of the animal before 
the flesh of the animal became unfit for use. 
In order that game, which constituted their 
main food supply, might not become scarce, 
the savages gave, to each other, such supplies 
as they could not use for themselves. That is, 

53 



Economics 

to the savage, giving was an economic neces- 
sity. When man domesticated the animals, 
different men reared different species of ani- 
mals; consequently they could give or they 
could trade. That is, if A. had horses and B. 
had cattle they could trade so many horses 
for so many cattle. 

With the inventions of governments, came 
the invention of a medium of exchange that 
we know as money. Then man began legal- 
ized trading and finally buying and selling. 
That is, if A. had horses and B. had cattle 
land they wished to exchange, A. would place 
a cash valuation on his horses and B. 
would place a cash valuation on his cattle. 
The exchange then became a simple arith- 
metical calculation. Or, using the same valu- 
ation, A. could sell to B. or B. could sell to 
A. for a cash consideration. 

54 



Economics 

This exchanging of products became the 
field of the merchant and for an indefinite 
period of time, the merchant has been con- 
ducting a small business in legalized trading. 
When power began to be applied to manu- 
facturing, the merchant began to buy and sell 
on an extensive scale. On account of the 
conditions that surrounded him, the merchant 
was compelled to guess what his customers 
wanted and buy accordingly. If he made a 
good guess, he had a prosperous business. 
If he made a poor guess he had his goods 
on his hands. 

This method of doing business has always 
resulted in tremendous financial losses. If 
the goods were perishable, the loss was in 
goods that had become unfit for use and had 
to be destroyed. If the goods were non- 
perishable, the loss was in goods that could 

55 



Economics 

not be sold. Capital invested is lying idle, 
hence at all times the merchant bears a tre- 
mendous loss from interest on idle capital. 

The merchant, of the old school, was not 
able to cope with this situation. He worked 
for nothing, then paid for the privilege of 
working and finally failed. The modern 
merchant has met this condition by placing 
an exorbitant profit on his goods and com- 
pelling the consumer to pay this profit. The 
result is, that the price of necessities have 
risen to prohibitive prices. Among the work- 
ing classes, the high cost of meat has caused 
serious distress. As meat passes through 
several stages from the producer to the con- 
sumer it will be necessary to make an eco- 
nomic investigation in order to discover the 
difificulty. 

We find that the farmer rears the animals 

56 



Econ 



omics 



and prepares them for market. He turns his 
surplus hay, grain and other by-products of 
the farm, that have Httle commercial value 
for any other purpose, into cattle, hogs or 
sheep. Since the farmer reared and prepared 
these animals for market practically from the 
by-products of his farm, these animals have 
not cost the farmer very much, consequently 
he can afford to sell them at a reasonable 
price. The farmer sells his cattle, hogs or 
sheep to a packer who transforms them into 
beef, pork or mutton. For this transforma- 
tion, the packer has proven to the satisfaction 
of every one that he realizes, on an average, a 
profit of about one dollar per head, which 
does not seem to be an exorbitant profit. The 
packer ships the carcasses in refrigerator cars 
to the various distributing points. If animals 
are shipped long distances on the cars, where 

57 



Economics 

they are deprived of their regular supply of 
food and water, the animals lose seriously in 
weight and the animal may contract disease. 
Hence, it is more economical and more sani- 
tary to slaughter these animals close to where 
they are raised and ship the carcasses in re- 
frigerator cars than it is to ship the animals 
alive, half way across the continent. 

From the distributing points, the packer 
sells the meat to the retail merchants. Here 
we find difficulty due to the method by which 
the retail merchant is compelled to do busi- 
ness. The retail merchant is dealing with a 
perishable product, yet the best he can do is 
to guess what his customers want and buy 
accordingly. The result is that he must have 
an exorbitant profit to cover his losses. The 
farmer is not to blame ; the packer is not to 
blame ; nor the retail merchant is not to blame 

. ■ 58 



Economics 

for the high cost of meat. The blame lies in the 
method in which the retail merchant is com- 
pelled to do business. 

The most practical method, for reducing 
the present high prices, seems to be the com- 
mission form of doing business. This would 
necessitate some changes from the present 
methods of doing business. First, it would 
be necessary for the consumer to assist the 
merchant by placing all orders in advance. 
Second, it would be necessary, for the govern- 
ment, to standardize all goods according to 
national standards. When a merchant has 
filled an order with standard goods he has 
fulfilled his obligations to the consumer. 

Before agriculture could be carried on suc- 
cessfully it was found necessary to divide the 
surface of the earth by means of lines thus 
confining each person to his own plot of 

59 



Economics 

ground. It might be advantageous to use simi- 
lar methods with the merchant. By using a 
commission form, a merchant should be able 
to handle goods at a profit not exceeding ten 
per cent and get rich on it. 



60 



Economics 



CHAPTER VI. 
Compensation. 

Referring to the Economic Table we see 
that different classes of people are engaged in 
different occupations, hence, the logical con- 
clusion would be that they receive different 
compensations. The hunter and fisherman is 
paid with his catch. He may do much labor 
and receive a very scanty compensation or he 
may do but little labor and receive a very gen- 
erous compensation. The stockraiser is paid 
with the products of his flocks and herds. The 
farmer is paid with the increase in the pro- 
ducts of the earth. That is, the farmer plants 
a grain of corn and in return gets an ear of 
coria and a stalk of fodder. Those who work 

61 



Economics 

in the mineral kingdom are paid with the pro- 
ducts of the mineral kingdom. That is coal 
producers are paid in coal; quarrymen are 
paid in stone; steelmen are paid in steel, etc. 
Those who perform useful tasks may enjoy 
the fruits of their labor. A shoemaker may 
make a pair of shoes and wear them ; a baker 
may bake a loaf of bread and eat it; or, a car- 
penter may build a house and live in it. These 
people may perform these same tasks for 
others and receive wages. Professional people 
are paid in fees, merchants are paid in'profits, 
financiers are paid in interest, rents, commis- 
sions, dividends or royalties, and all other 
classes receive salaries. 

Salaries arrange themselves into three gen- 
eral classes. Those who are paid for what 
they can do or produce. Those who are paid 
for what they know and those who are paid 

62 



Ecotiomics 

for the patronage the}^ can command. The 
wages of those engaged in the various Hnes of 
manufacturing are generally arranged accord- 
ing to the amount of the manufactured article 
the employee can produce. Salaries of office 
employees, teachers, etc., are generally ar- 
ranged according to what they know. In spe- 
cial cases, wages may be arranged according 
to patronage. The services of a clerk in a 
department store, who has many wealthy 
friends and can induce these friends to trade 
with the concern, is worth more to the con- 
cern than the services of a person who has no 
wealthy friends. In politics, the man who can 
command votes may be paid a higher salary 
for his services than the man who simply goes 
to the polls and votes. In finance, the person 
who can bring the money or influence of his 
wealthy friends into a business can command 

63 



Economics 

a better salary than the person who has no 
weahhy friends. 

In some manufacturing establishments 
profit sharing, with the employees, has been 
tried. This condition does not affect the con- 
sumer. In some cases, it may stimulate the 
employees to greater efforts in production. 
Generally, it leads to very serious differences 
of opinion between the management and the 
working forces. Opportunities may be given 
to the workmen to suggest different methods 
of operation than are being used. If the 
methods suggested result in decreasing the 
cost of production, the workmen may be given 
a part of the amount saved. That kind of 
profit sharing, is economically valuable to all 
parties concerned. 

We find no natural or economic law govern- 
ing fees. A person may blow out a match 

64 



Economics 

and save valuable property from being de- 
stroyed by fire. The value of his labor might 
be calculated from an economic standpoint. 
But, v^hen a physician saves the life of a 
valuable member of society, there are so many 
complications that the economic value of his 
work could not be determined, even by apply- 
ing the rules of higher mathematics. 

The compensation of corporations vary ac- 
cording to the economic law that controls the 
corporation. Where nature makes no charge 
for the product, as in coal operations and 
kindred transactions, the price is set by the 
consumer. That is, the producer can charge 
no more for his product than the consumer 
is willing to pay or can be made to pay. 

If the corporation is governed by the second 
economic law, where goods are simply trans- 
ported from one point to another point, the 

65 



Economics 

freight rate is determined very largely by 
competition with other means of transporta- 
tion. Economically, all transportation com- 
panies are controlled by outside forces. Eco- 
nomically railroads are controlled by the ship- 
pers. This brings about a peculiar situation 
in the operations of railroads. If the railroads 
are allowed to compete against each other they 
are apt to bring on a fight of the Kilkenny cats 
that will destroy the railroads. If the rail- 
roads are protected by law they are quite apt 
to become a monopoly. 

If the corporation is controlled by the third 
economic law, where certain articles are put 
together to produce a desired product then 
the producer sets the price of the product. 
This is the condition imposed upon the steel 
companies and similar branches of manufac- 
turing. The more opposition that is placed 

66 



Economics 

in the way of steel companies and similar 
branches of manufacturing the more the 
product will cost and the more the consumer 
will have to pay for the product. 

Incomes from investments range through 
all the Economic Laws. These conditions will 
be discussed under investments. 



67 



Economics 



CHAPTER VII. 
Valuation. 

Probably the first step necessary in the study 
of valuation is to make a distinction between 
wealth and capital. Wealth we will under- 
stand to mean such things as flour, coal, oil, 
clothing, etc. Capital we will understand to 
mean gold, silver, bank notes, stock, bonds, 
mortgages, etc. From this we see that the 
value of wealth is determined by nature while 
the value of capital is determined by govern- 
ments. That is, the value of flour is the length 
of time it will sustain life. The value of coal 
is the amount of heat it will produce, etc., 
while the value of money is in the amount of 
these articles that a given sum of money will 

68 



Economics 

buy. As the population of the earth increases, 
the necessity for wealth increases. Hence, the 
tendency of the value of wealth is to constantly 
increase. Using gold as a standard for capital, 
the gold mines of the earth are constantly 
pouring their entire product into the capital 
or money market. Hence, the constant ten- 
dency of capital is to decrease in value. 

Since the formation of governments, the 
governments have maintained a standard med- 
ium of exchange which we know as money. 
Money has proven itself to be very satisfac- 
tory as a medium of exchange, but money has 
not proven itself to be satisfactory as a 
standard of value. In commercial transac- 
tions the value of money varies or fluctuates. 
Using the American dollar as an illustration. 
At the same period, a dollar will buy different 
amounts of the same grade of article in dif- 

69 



Economics 

ferent markets. Or, using different periods, a 
dollar will buy different amounts of the same 
grade of article, in the same market. Except 
in the measurement of money, money has 
proven itself to be simply a medium of ex- 
change and not a standard of value. 

This fluctuation of the value of capital is 
proving to be a very serious problem with the 
wage earner. The wage earner transforms 
his time, energy, talents, etc., into wealth but 
he receives his pay in capital. Literally, the 
wage-earner's head is fastened in wealth and 
his feet are fastened in capital. With the con- 
stant tendency of wealth and capital to sepa- 
rate this condition nearly stretches the life out 
of the wage-earner. 

The wage-earner is worthy of his hire. If 
he produces wealth, then he is entitled to be 
paid in wealth or its cash equivalent. Owing 

70 



Economics 

to our economic relations, conditions that suit 
one class of persons will not suit other classes 
of persons and, generally, what one class of 
persons want other classes of persons do not 
want. Referring to the economic table we see 
that the ideas, desires and occupations of each 
class of persons remains distinctly separate 
except in one condition : — all people must eat 
in order to live. The standard article of food, 
in all civilized countries, is wheat bread. 
Wheat bread is made from wheat flour ; wheat 
flour is made from wheat and wheat is pro- 
duced from the soil. 

In order to secure a standard of value, place 
an able bodied man on a plot of ground for a 
period of ten hours. Let him devote his ener- 
gies to the cultivation of wheat. Whatever he 
can produce, that is his wages. By a careful 
system of calculations, it has been found that 

n 



Economics 

he will produce one and three-fourths bushels. 
One and three-fourths bushels of wheat, or its 
cash equivalent, then becomes our standard of 
value. It matters not, whether it is necessary 
to sell wheat at five cents per bushel or five 
dollars per bushel, ten hours of unskilled 
labor is always worth one and three-fourths 
bushels of wheat, or its cash equivalent. 

The valuation of property will be treated 
more fully under taxation and the valuation 
of manufacturing plants will be treated more 
fully under investments. 



72 



PART II. 

Engineering Conditions 



CHAPTER VIII. 

Investments in Natural Products. 

Natural Investments, we will infer, to mean 
investments in land and the direct products 
of land. Investments in land may be consid- 
ered under either one of three conditions. 
First — what the land will yield; Second — 
what the land will produce ; Third — what the 
land will earn. 

Investments for what land will yield refers 
entirely to mineral lands. Unless the mineral 
occurs in large bodies, where it can be defi- 
nitely located, the recovery of the mineral is 
more or less of a gambling proposition. A 
gambling proposition, we will infer is a propo- 
sition that cannot be calculated or estimated. 
In the gas and oil business, a small investment 

75 



Economics 

may yield large returns or a large investment 
may yield no returns. Considering the gam- 
bling proposition as beyond the scope of our 
present study, we will confine our attention to 
large bodies of minerals, especially coal. 

Practically all coal mining is done by large 
corporations and the corporations gain control 
of the coal either by one of three methods. 
The first method is where the corporation 
leases the coal and pays the owner a royalty 
of so much per ton at the time of mining. No 
time being specified as to when the mining 
shall be done, nor how much coal must be 
mined during any particular year; stating 
however, that all royalties, due, must be paid 
at stated periods. This method permits min- 
ing to be conducted during an indefinite 
period. If for any reason no mining is done, 
no royalties are due. 

76 



Economics 

The second method is to specify the amount 
of royalty to be paid and the number of tons 
to be mined each year. Specifying that the 
amount of royalty stated must be paid each 
year even if no mining is done. The third 
condition is for the corporation to own the 
coal. 

By using either the first or second methods, 
the corporation pays a royalty, but has no 
taxes or interest on investment to pay. By 
using the third method, the corporation pays 
no royalty, but has taxes and interest on in- 
vestment to pay. Investments in mineral lands 
are absolute or closed investments. That is, 
they yield absolutely no return until the time 
of mining. At the time of mining, the profit 
must be equal to any previous price paid, plus 
the accrued interest on that price, plus taxa- 
tion. Under existing conditions, minerals 

77 



Economics 

double in value once in about every ten years. 
As previously shown, the price of minerals is 
controlled by the consumer. By doubling the 
value every ten years, minerals soon become 
so valuable that they cannot be used for com- 
mercial purposes; hence the manufacturer re- 
fuses to buy. From the conditions stated it 
can readily be seen that investments in large 
acreages of high priced mineral lands may lead 
to serious financial difficulties. 

In the second condition, where investments 
are made in land for what the land will pro- 
duce, refers largely to agricultural pursuits. 
Owing to moisture or lack of moisture, three 
conditions have arisen in agriculture. First — 
where the moisture is furnished by the ordin- 
ary rain fall; Second — where the moisture is 
scanty or periodic; Third — where man pro- 
vides moisture by artificial means. 

78 



Economics 

The first condition implies the agriculture 
that has been conducted in different parts of 
the earth for centuries. The problems in- 
volved are such as have been solved by every 
successful farmer. In going into a new coun- 
try, that has a good climate and large annual 
rainfall, the prospective farmer naturally 
would expect to find timber for buildings and 
perhaps fish and game to assist in a livelihood 
from seed time to harvest. 

Dry Farming. 

In certain portions of the earth there are 
areas where the climate may be good, but the 
rain fall is scanty or periodic. In these sec- 
tions have grown up what is known as Dry 
Farming. In addition to the ordinary prob- 
lems of sowing and harvesting, the first prob- 
lem the Dry Farmer will need to consider 

79 



Economics 

is: — how to retain the scanty or periodic 
supply of moisture? As he is experimenting 
with a natural condition, that of retaining the 
scanty supply of moisture in the soil, he would, 
necessarily, have to gain his education, large- 
ly, by means of experience. This might mean 
expensive crop failures. In addition, the 
prospective Dry Farmer, going into an arid 
or semi-arid district, would undoubtedly find 
less timber for buildings and perhaps less fish 
and game to assist from seed time to harvest. 

Irrigation Farming. 

Before man could till the soil of the desert, 
he was compelled to furnish moisture for the 
soil. This was accomplished by building dams 
and grading ditches. This calls for the work 
of the engineer and the capitalist. The work 
of the engineer includes not only the building 

80 



Economics 

of the dam, but also the location of the ditches 
and the grading of the land. 

After the engineer's work is completed, an 
interesting question arises as to the control 
of the water supply. Every farmer, in an 
irrigation project is interested in the water 
supply. But, he is also interested in his own 
work and not interested in his neighbors' work. 

If the water supply is controlled by inter- 
ested parties, in case of accident or shortage, 
naturally there would be serious difficulty 
among the farmers. If A and B are two 
farmers in an irrigation project and they can- 
not agree among themselves, their differences 
will have to be settled in Court. These condi- 
tions seem to point to the logical conclusion 
that the person in charge of the water supply, 
in an irrigation project, must be a disinterested 
party, preferably a government official. 

81 



Economics 

Since it is only necessary to irrigate land 
that is naturally devoid of moisture, the pros- 
pective irrigation Farmer would find no tim- 
ber on his land to assist in buildings. Since 
the desert is always a barren waste, he would 
probably find very little of anything else that 
would assist him from seed time to harvest. 

Scientific Farming. 

When land, that once yielded abundantly, 
refuses to yield, the farmer knows that some 
element is lacking. In order to ascertain what 
this element is, the farmer has called the 
chemist to assist him and inaugurate what is 
known as Scientific Farming. The Scientific 
Farmer may find it cheaper and more conven- 
ient to have a chemist analyze the soil for him, 
but in order to intelligently follow the chem- 
ists' analysis, it would seem necessary for the 

82 



Economics 

farmer also to have a working knowledge of 
chemistry. 

Scientific Feeding. 

Closely allied with scientific farming, is 
scientific feeding. Generally in feeding the 
farmer has one of three objects in view. 
Either to increase the size of the animal; to 
cause the animal to yield a product in the way 
of work, milk, eggs or wool; or, to cause the 
animal to increase in weight in preparation 
for market. 

If the animal is fed with the idea of in- 
creasing its size, its food must nourish all 
parts of the body. Hence, the food must be 
a balance ration with frequent changes. After 
the animal has attained its growth and is fed 
with a view of yielding a product its ration 
becomes unbalanced with little if any change. 

83 



Economics 

As an illustration, if fed at regular intervals, 
working horses may be fed the same ration, 
day after day, and remain in perfect health. 
If the animal is fed with a view to increasing 
its weight for market, the ration may be un- 
balanced but should contain a product rich in 
carbon. 

Growth. 

Referring to the Economic Laws as pre- 
viously explained, growth would occur in the 
Economic Law of Increasing Returns, or the 
Economic Law of Production. In youth, a 
certain portion of the food consumed remains 
as a permanent investment. That is, the ani- 
mal or plant increases in size and weight. 
This result can only be obtained by retaining 
a portion of the food consumed. After the 
lanimal or plant has obtained its growth, the 
food consumed is simply transformed. That 

84 



Economics 

is, the animal or plant no longer increases in 
size or weight but its ability for doing work 
increases. In old age, the size or weight of 
the body no longer increases nor is the body 
capable of performing hard tasks. On the 
other hand, in old age there is a general ten- 
dency for the body to decrease in weight. 
This would seem to show that in old age life 
is a-t least partly sustained from the forces 
stored in youth. Hence, we see that it is the 
young animal or plant that needs an abun- 
dance of food if it is to properly develop. 

Serious conditions may arise in after life, 
if a young animal or plant has been deprived 
of its proper amount of food or moisture. 

The third condition, where investments are 
made in land for what the land will earn, 
refers principally to investments in city prop- 
erty. This condition will be treated under 

taxation. 

85 



Economics 



CHAPTER IX. 
Investments in Commercial Products. 

Commercial Investments seem to follow 
very closely the Economic Laws. First, in- 
vestments in material; second, investments in 
transportation facilities; third, investments in 
Manufacturing Plants. Investments in Min- 
eral lands, as described in the preceding chap- 
ter, are practically applicable to all investments 
in material. That is, large sums of money in- 
vested in high priced material, if the pur- 
chaser has no definite knowledge as to when 
the material is to be sold, may lead into serious 
financial difficulties. 

Investors in transportation facilities and 
manufacturing plants need to guard constant- 

86 



Economics 

ly against over capitalization. Over capitaliza- 
tion may occur in different manners or may 
be the effect of different causes. After "all 
operating expenses are paid, if the net pro- 
ceeds from the plant will pay the legal rate of 
interest on the capital invested to produce the 
plant, the plant will not be considered as over 
capitalized. 

Building Plant. 

The first step, in over capitalization, is the 
building of the plant. If the plant is built, 
when the cost for labor and material are ab- 
normally high, the first cost of the plant will 
be abnormally high. When the cost of labor 
and material again sink to normal proportions, 
the plant may be found to be over capitalized. 
That is, the net proceeds from the plant may 
not be sufficient to pay the legal rate of inter- 

87 



Economics 
est on the capital invested to produce the plant. 

Change of Alignment on Railroads. 

In railroads, change of alignment may cause 
the road to become over capitalized. Many 
railroads are built with the idea that at some 
future time expensive changes will be made 
in the alignment. If these changes are paid for 
out of the earnings of the road, the property 
is permanently improved. But, if these im- 
provements are paid for by means of bond 
issues, the road may become over capitalized. 

As an illustration, a section of road five 
miles in length is to be improved. That means 
that five miles -of new track is added to the 
system. But, it also mieans that five miles of 
previous track has been destroyed. If this 
improvement is paid for from the surplus 
earnings of the road, the road is permanently 



Economics 

improved. The road is investing its own 
earnings in an improvement. Whatever 
sum this improvement earns can be cred- 
ited directly to the earning power of the road, 
minus the interest on the original cost of the 
five miles of road that was destroyed by the 
improvement. But, if the government is paid 
for by means of bond issues, the road is in- 
vesting borrowed capital. Hence, the road 
must deduct from its earning power not only 
the interest on the bond issue, that was neces- 
sary to pay for the improvement, but also 
the interest on the first cost of the five miles 
of road that it was necessary to destroy in 
order to create the improvement. 

Competition. 

Transportation facilities may become over 
capitalized by being paralleled by other trans- 

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Economics 

portation facilities. Steam roads may be 
paralleled by other steam roads or by electric 
roads. Or, railroads may be paralleled by 
steam-ship lines. In either case, the traffic 
is deflected until the net income is not suffi- 
cient to pay the legal rate of interest on the 
capital invested. ' 

Manufacturing Plants. 

In the case of manufacturing plants, inven- 
tions may cause a sudden demand for some 
new article. Expensive plants are built to 
meet this demand. In a comparatively short 
time the demand for the article is supplied and 
the plants become idle. If no other use can 
be found for the plant, it remains permanent- 
ly idle and consequently becomes a total loss. 
Conditions may arise where the plant can be 
used for other purposes and a part, or the 

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Economics 

whole, of the investment saved. In other 
cases, it may be possible to move the plant to 
a new site, either in a different town or a 
different part of the country. In either case, 
a part or the whole value of the plant may be 
saved. 

Cases very often arise where a plant may 
be bought by a competing firm and the plant 
dismantled. In that case the plant becomes a 
total loss. Business conditions may be such as 
to make such a procedure economical. There 
may be business enough to keep one plant in 
operation but not business enough to keep 
both plants in operation. In that case it might 
be more economical to dismantle one plant and 
recover as much as possible from the scrap. 

Supply and Demand. 
In making investments the commercial man 
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Economics 

is constantly called upon to cope with the con- 
dition of supply and demand. Supply and 
Demand is the thermometer of trade and 
bears about the same relation to trade that the 
thermometer bears to the weather. That is, 
supply and demand measures trade. 

Overhead Expense. 

Again, the commercial investor, is constant- 
ly called upon to cope with the condition of 
Overhead Expense. Overhead Expense, we 
will infer to mean those conditions that can- 
not be accurately estimated. Overhead Ex- 
pense would include such conditions as deteri- 
orations of buildings, bridges, tracks, and 
rolling stock on railroads. Deterioration of 
plant and machinery in manufacturing con- 
cerns. Deterioration of goods and store fix- 
tures with the merchant. The conditions vary 

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Economics 

so widely that no general method can be used 
to estimate the conditions, except to deduct a 
certain percentage annually from the original 
cost of the plant. In special cases, special 
methods might be devised. Experience has 
taught that, barring accident, a locomotive can 
be estimated to run a certain number of miles 
without repair. Dividing this distance into 
the cost of repairing a locomotive will give, 
very closely, the cost per mile of running a 
locomotive. In all mercantile investments, 
overhead expense becomes a serious item. 
The conditions affecting mercantile invest- 
ments were treated under Distribution and 
Consumption. It does not seem necessary to 
repeat them. 



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Economics 



CHAPTER X. 
Financial Investments. 

Financial Investments seem to follow three 
general conditions. Investments in buying 
articles, or ownership; investments that will 
give control, and investments that will yield 
an income. In buying an article, three condi- 
tions, again, present themselves. The article 
may be bought with the idea of using it. The 
article may be bought with the idea of, again, 
selling it; or, the article may be bought with 
the idea of exchanging it for some other 
article. 

The article may be used until it has no fur- 
ther commercial value; as food that has been 
consumed or clothing that has been worn out. 

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Economics 

In such a case, the cost would be the total cost 
of the article. Or, the article may be used for 
an indefinite period and again resold. This 
condition would include real estate that has 
been used for a home but more particularly 
contractors' supplies. In either case the profit 
or loss would be first cost plus the amount 
earned by the article during the time of own- 
ership, minus the selling price. 

Probably no field of labor calls for a wider 
use of practical economics than that of 
handling contractors' supplies. The contrac- 
tor is always bound by a time limit that is 
specified in the contract. Generally, the con- 
tract specifies that the contractor must pay 
a certain sum for each day that the work re- 
mains unfinished, after the time limit has ex- 
pired. This condition is known, among con- 
tractors, as a penalty. Some contracts specify, 

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Economics 

that the contractor will be paid a certain sum 
for each day that the work is completed, be- 
fore the time limit, specified in the contract, 
expires. This condition is known as a bonus. 
The penalty clause and the bonus clause, in a 
contract, are not always enforced although it 
is never safe to entirely ignore them. 

Estimating Contracts. 

The first step, we will consider is estimating 
the contract. As an illustration, we will use 
a contract for a building. In actual construc- 
tion, it is always necessary to begin with the 
foundation and construct the building item by 
item until the building is completed. In esti- 
mating we use just the reverse process. As 
an illustration, painting is the last item in con- 
struction. Then painting is the first item to 
be considered in the estimate. Checking back 

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Economics 

item by item and noting the time required to 
construct each item, we finally come to the 
foundations. By deducting the total time re- 
quired to construct the various items, from 
the time specified in the contract, gives the 
time left to construct the foundations. If this 
time is amply sufficient to construct the foun- 
dations, it is safe to assume that the building 
can be completed, in the time specified. 

In estimating, certain conditions need to be 
taken into consideration. If the time speci- 
fied is for a year or more the price of labor 
and the price of material may be advanced in 
the meantime. The distance that machinery 
and material must be moved and the kin.d of 
roads available; whether or not it will be 
necessary to construct roads in order to get 
machinery and material on the job ; if the con- 
tract must be in operation during different 

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Economics 

seasons of the year it may be necessary to 
take atmospheric conditions into consideration. 
Any, or all of these conditions may occur dur- 
ing some stage of the work. 

Sub-Contracting. 

In large jobs, it is quite customary for one 
contractor to contract for all the work and 
then sub-contract certain portions to other 
contractors. The economic conditions that 
govern the sub-contractor are the same as the 
economic conditions that govern the con- 
tractor, hence, in the discussion the sub-con- 
tractor may be ignored. Whether it is cheap- 
er to use hand work or machine work, much 
or little equipment, depends entirely upon 
local conditions. If too many men are placed 
in a small territory the men get in each other's 



Economics 

way, hence they cannot work to the best ad- 
vantage. 

Contracting Machinery. 

Contracting machinery is always subjected 
to hard usage, hence, the deterioration is great 
and parts are hable to break, at any time. To 
guard against this condition, all contracting 
machinery is made so that the parts can be re- 
placed. In case of a breakdown, a contractor 
must immediately consider three conditions. 
His plant is idle, hence, it is not earning any- 
thing. His working force is idle and he may 
have to pay them. His work is not progress- 
ing, hence, in the end, it may make him liable 
to a penalty or at least decrease his chance of 
earning a bonus. In view of these losses, it is 
self evident, that the most economical course 
for a contractor, is to have duplicate parts of 

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Economics 

every machine on hand and a man on the job 
who can put those parts into place as quickly 
as possible. 

Interruption of Work. 

Losses due to interruption in operations, 
vary in direct proportion with the number of 
men employed. If sixty men are employed, 
an interruption of one minute means a total 
loss of one hour, for one man. If six hundred 
men are employed, an interruption of one min- 
ute means a total loss of ten hours, for one 
man. Hence, it will be readily seen, that in 
work where much blasting is required and a 
large force of men are employed, it is more 
economical to have the blasting done, either 
in the morning, before the men begin work; 
at noon, when the men are at dinner, or, in 
the evening, after the men have quit work. 

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Economics 

Work During Storms. 

When it is necessary to conduct work dur- 
ing the winter months, aside from the humane 
feature, is it economical to continually work 
stock and men during cold winter storms? 
Under normal conditions, of clear or cloudy 
skies, stock and men must exert a certain 
amount of energy in order to perform the 
tasks required of them. If work is continued 
during a storm, they must not only exert their 
usual amount of energy but they must also 
exert an additional amount of energy to with- 
stand the storm. The general tendency is to 
weaken both man and beast, so that after the 
storm is over, they do not exert their former 
energy. 

Very often, contractors are called upon to 
pass final judgment on what may be treacher- 

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Economics 

ous foundation material. A good rule is 
this : — When in doubt, soak the material in 
water for twenty- four hours and note what 
happens. 

When articles are bought, with the idea of 
again selling them, it brings in the condition 
of merchandise, which has been discussed in 
previous chapters. When articles are bought 
with the idea of exchanging them for other 
articles it brings in the condition of trade. 
This trade is very often conducted with dif- 
ferent Races of people, in remote parts of the 
world. The conditions are so remote, that 
they will not permit of an economic discus- 
sion. 

Commissions, Options, Rents. 

Investments, that are made with the idea of 
obtaining control, divides into two classes. 

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Economics 

Conditions where the control is for a defined 
period of time ; and conditions where the con- 
trol is for an undefined period of time. Con- 
trol, for a defined period of time, assumes one 
of three forms. It may be in the form of a 
commission; in the form of an option; or, in 
the form of a rent. That is, A. may desire to 
buy or sell property. B. may agree to pur- 
chase property for A. or agree to find a pur- 
chaser for A.'s property. If B. is successful, 
A. pays B. a certain sum that is known as a 
commission. If B. is unsuccessful, he re- 
ceived no pay for his labor. A commission is 
a sum paid or received for the purchase or 
sale of property. 

In the second case A. owns property that he 
values at Ten Thousand Dollars. For a cer- 
tain specified sum paid by B., A. agrees to sell 
this property to B. any time within a specified 

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Economics 

time, for the sum of Ten Thousand Dollars. 
B., now has an option on A/s property. If 
during the time specified B. is able to sell this 
property for Fifteen Thousand Dollars, B.'s 
portion of the selling price is Five Thousand 
Dollars. If B. is not able to sell the property, 
by the end of the time specified, the control of 
the property reverts back to A. and B. loses 
whatever sum he paid to A. That is, an op- 
tion, — is a sum paid or received for the privi- 
lege of controlling the value of property, for a 
defined period of time. In the third case, A. 
owns a house and B. lives in the house. For 
this privilege B. pays to A. a certain defined 
sum for a certain defined period of time. This 
sum is known as a rent. Rent is a sum paid 
or received for the privilege of using property 
for a defined period of time. 



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Economics 

Stock Companies. 

The control of property for an undefined 
period of time, brings in the condition of 
stock companies. In stock companies the 
stockholder becomes a part of the company 
and is entitled to participate in the manage- 
ment of the affairs of the company and to vote 
at the election of officers. The bondholder 
simply invests in the bonds of the company 
that bear a stated rate of interest. The bond- 
holder does not participate in the business af- 
fairs or the management of the Company. 

There is a difference in the method in which 
stockholders and bondholders receive their 
pay. After all interest on bonds and other 
expenses of the company have been paid, 
whatever surplus remains is paid to the stock- 
holders in the form of dividends. If there is 
no surplus, the stockholders receive no divi- 

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Economics 

dends. In case the interest on bonds and the 
expenses of the Company are greater than the 
income of the Company, the stockholders may 
meet the deficit by paying an additional sum 
called an assessment, or they may allow the 
affairs of the company to be closed out. 

The stockholders must pay the interest on 
the bonds even though they must borrow the 
money to do so. If interest on bonds is not 
paid the bondholders may close the affairs of 
the company. In foreclosure proceedings the 
bondholders are paid first. Whatever is left 
is paid to the stockholders. 

Generally stock companies will come under 
one of three conditions. Mining companies, 
transportation companies, and manufacturing 
companies. Mining properties are only valu- 
able so long as the mineral or metal lasts. 
After the mineral or metal is exhausted the 

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Economics 

property is worthless. Hence, all stocks and 
bonds of the company are worthless. Where 
valuable bodies of metal or mineral are en- 
countered, small investments may yield large 
returns. If no metal or mineral is encount- 
ered, large investments may yield no returns. 

Transportation companies remain in opera- 
tion continuously for indefinite periods of 
time; hence their securities furnish long time 
investments. 

Manufacturing conditions are governed 
more or less by local and national affairs. 
Hence, manufacturing securities are more or 
less erratic. Under certain conditions, they 
may yield large returns, while under other 
conditions, they may yield no returns. During 
prosperous seasons, mills may run day and 
night, while during panics, the mills may re- 
main idle for indefinite periods of time. 

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Economics 

Many municipal improvements are made by 
means of bond issues. The life of the average 
brick pavement or terra cotta pipe sewer is 
about twenty years. The life of the average 
macadam road is about five years. Improve- 
ments that are made by means of bond issues, 
and the improvements wear out before the 
bonds mature, form a class of investments 
that will cause trouble for some one. 

Under existing conditions, the finances are 
conducted largely through the banks. Since 
transportation companies are constantly mov- 
ing, all transportation must be in cash. Un- 
less there are adequate banking facilities at 
the source and mouth of navigable rivers 
the water transportation may be affected, to 
such an extent, as to affect all the industries 
along the river. 



108 



Economics 



CHAPTER XL 

Intellectual Investments. 

Almost three thousand years ago King Sol- 
omon wrote the words : — "As a man thinketh 
in his heart, so is he". If we go back to Geol- 
ogy, which is the history of the earth written 
in the rocks, we find that the fish were the first 
animals to appear upon the earth. Observa- 
tion shows that nature placed but one require- 
ment upon the fish : — that of procuring food. 
According to Geology, the next animals to 
appear upon the earth were the birds and 
four footed beasts. Observation shows that 
nature placed but two requirements upon 
these animals, that of procuring food and 
shelter. Horses, cattle and birds are not re- 

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Economics 

quired to provide clothes for themselves. Ac- 
cording to the same rocky history, man was 
the last of the animal kingdom to appear upon 
the earth. Observation shows that nature 
placed three requirements upon man. In or- 
der to live man must have food ; he must have 
shelter; and he must have clothing. Going 
back to Primative man, his shelter may have 
been a cave in the rocks, and his food, may 
have been fruit from the trees. Later he 
clothed himself. 

At this point it is necessary to note a dis- 
tinct revision of mental processes. When he 
wanted food or shelter, the idea originated 
from without and he sought it. When he 
wanted clothing, the idea originated in his 
own brain and it was necessary to execute it 
with his hand. The dress of primitive man 
was undoubtedly crude. In some cases it may 

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Economics 

have been leaves from trees or skins from 
animals. Yet, it conveys the idea of invention 
and that man must use his brain to supply part 
of his needs. 

If we read our history carefully, we see 
that for many centuries man has distinguished 
between the three conditions of necessities, 
conveniences and luxuries. Necessities, we 
will understand to mean the elements neces- 
sary to sustain life. Conveniences, we will 
understand to mean the elements that help 
to sustain life. Luxuries, we will under- 
stand as conditions that may be desired yet 
are neither necessary nor convenient. 

History shows conclusively that man's oc- 
cupation has always exerted a marked in- 
fluence on his intellect. The true hunter be- 
comes as shy and as diffident as the game that 
he seeks to capture. The school of the 

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Economics 

hunter, is to learn to distinguish the animal 
or bird from its foot print, track, or sound of 
its voice. His college is the mountain, the 
valley, the plain and the stream. His univer- 
sity is the universe. To the man who must 
procure his livelihood by means of hunting, 
book learning is a luxury. 

When man domesticated the animals, so 
that it was no longer necessary for him to 
hunt them, in order to procure a livelihood, 
we find his shyness and diffidence disappear- 
ing. The semi-civilized man had more leisure 
and became broader in his ideas. To him, 
book learning was a convenience. Following 
our history a step farther, we see that in or- 
der to obtain a livelihood, man was compelled 
to enter into complicated and involved busi- 
ness transactions. In order to assist him in 
his business, book-learning became a necessity. 

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Economics 

A child born into the world knows no more 
about the conditions of the world than did 
primitive man. It is only by means of educa- 
tion that the average child ever becomes able 
to cope with modern conditions. Since there 
is much to learn and the time limited, is it 
economical for the student to spend years in 
studying languages that the world has long 
since discarded? Is it economical for the 
student to spend too much time in research 
work? After leaving High School, is it 
economical for a student to continue at school 
unless he has a definite aim in view? Is it 
economical to use mechanical calculating de- 
vices? It has been proven, that automatic 
machinery creates careless and incompetent 
workmen. Might not mechanical calculating 
devices create careless and incompetent busi- 
ness men? Many of these devices are ingen- 

113 



Economics 

ious and the results obtained are marvelous. 
Among engineers the slide rule is extensively 
used. While the sHde rule is simply an in- 
genious plaything when placed in the hands of 
competent experienced men it does produce 
correct results. 

The student will readily see that great 
changes have taken place in the world, and 
that many of these changes did not result for 
the betterment of humanity. These changes 
must be the effect of some cause. Rum was 
the curse of the savage hunter. It destroyed 
the tissue of his body so that he was no longer 
able to follow the game, which in many cases, 
constituted his only food supply. Machinery 
was the curse of the semi-civilized man. With 
the aid of machinery, the natural feeding 
grounds were broken up, and the stock had 
nothing upon which to subsist. Charity is the 

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Economics 

curse of the civilized man. Charity supplies 
many necessities that the average person 
should learn to supply for themselves. Hence, 
the brain has no chance to develop. The indi- 
vidual is unable to cope with the intellectual 
conditions of a legitimate business, hence he 
turns to crime and then to war. It was char- 
ity that gave the drunkard his cup, it was 
charity that gave the beggar his bread, it was 
charity that set the nations of the world at 
war with each other. 



115 



PART III. 

Social Conditions 



CHAPTER XII. 

Governments, Their Origin and 
Functions. 
Following the Economic Table, as previ- 
ously outlined, we see that occupations oc- 
curring in the different economic laws produce 
different intellectual developments. While the 
school of the hunter consisted in being able to 
distinguish the animal by means of its foot 
print or track, the work of the hunter was 
to follow this track. If the hunter lost the 
track he lost his chance of capturing the ani- 
mal in its lair, or on its feeding ground. Fol- 
lowing to the commercial branch. A chain is 
no stronger than its weakest link. Hence, a 
blacksmith makes a chain and if the chain is 

119 



Economics 

to be valuable each link must be equally 
strong. Following the same law to the finan- 
cial branch, the guard must guard all the prop- 
erty placed under his care and the messenger 
must deliver all messages entrusted to his 
keeping, otherwise their services are valueless. 
Following the same law to the intellectual 
branch, the bookkeeper must place every 
figure in its proper place and count every 
figure according to its exact value, otherwise 
his work is valueless. 

Following the Economic Table through the 
second law, we see that the stock raiser was 
compelled to follow his flocks and herds. The 
railroad man travels back and forth, like a 
shuttle, the banker takes up his daily routine ; 
and the most difficult task in teaching is to 
keep from getting into a mental rut. 

Following the Economic Table through the 

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Economics 

third law, we see that no farmer ever planted 
two crops where the conditions were exactly 
the same. No Architect ever designed two 
buildings that were exactly alike in every de- 
tail. No financier ever made two investments 
where the conditions were exactly the same. 
No doctor or lawyer ever had two cases that 
were exactly alike. Each condition is differ- 
ent, and so widely different, that each task 
becomes a separate problem. 

Lawyers, doctors, ministers, financiers, and 
architects are known as professional people. 
The question then arises, — what constitutes 
a professional person? Going back to the 
Economic Table, as a guide, we see that people 
working in the first law were compelled to 
train their minds so as not to miss anything. 
The hunter must find every track, the black- 
smith must make every link equally strong, the 

121 



Economics 

bookkeeper must place every figure in its cor- 
rect place and count it for its exact value. 

Following the same Economic guide, we see 
that people working in the second law must 
train their minds to work in an orbit. The 
stock raiser was compelled to follow his herds, 
although they may have led him over the same 
territory, day after day. The railroad man 
travels back and forth over the same section 
day after day. Hence, he must train his mind 
to perform practically the same daily duties. 
Likewise the banker must train his mind in 
more or less of a daily routine. While, the 
teacher begins at certain intellectual points 
and advances to certain other intellectual 
points, during the term, and then performs 
practically the same duties for each succeed- 
ing term. 

With the professional person, since each 

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Economics 

task is different, he has no previous or routine 
duties to assist or guide him. His only method 
is to follow his task step by step, as an en- 
gineer follows his grade line from the valley 
to the summit of the mountain. Hence, his 
mind must be trained accordingly. It is gen- 
erally conceded that persons who write letters 
after their names are professional persons. 
In most cases letters, written after the name, 
signifies, that at some time the person com- 
pleted a course of study at some one of the 
higher institutions of learning. These persons 
may or may not be able to follow a compli- 
cated problem step by step, hence it is neces- 
sary to define professional persons. 

Professional persons are persons who use 
their brain to assist them in their everyday 
tasks. We must not jump to the conclusion 
that since every person has a brain and a daily 

123 



Economics 

task, that every person is professional. About 
one-tenth of one per cent of the people seem 
to use their brain to assist them in their every- 
day tasks, the other ninety-nine and nine- 
tenths per cent seem to use their brain to re- 
tard them in their every day tasks. It is the 
hope of the writer, that every person will hon- 
estly believe that they belong to that favored 
one-tenth per cent. 

When man began to till the soil he met a 
natural condition that of the duration of time 
between seed time and harvest. This duration 
is any where from three to ten months and 
during this period, if the crops are to mature, 
the plants dare not be disturbed. Hence, the 
growing plants had to be protected. In peace- 
ful times, one person could protect vast areas 
and, when assistance was needed, inform 
other persons in the immediate vicinity. For 

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Economics 

this service, the watchers could be paid a por- 
tion of the crop. Banding these watchers to- 
gether, into an organization, would form a 
government and paying a portion of the crops 
would form taxation. Hence, the first use of 
governments is protection and the principal 
use of taxation is to support the government. 
After the crops were harvested and ready 
for market the early farmers met with another 
difficulty. A. might prepare a portion of 
grain for market, but the grain might not 
actually be consumed until it reached E., F., G. 
or H. as the case might be. If each person 
through whose hands this grain passed had 
his own system of measuring, it would lead to 
endless confusion. This confusion was over- 
come by the government establishing a system 
of weights and measures to be used in con- 
ducting all commercial transactions. Hence, 

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Economics 

the second function of government, is regula- 
tion. From this, we can draw the conclusion 
that governments are necessary in order to 
protect and regulate the workings of civilized 
man. 

By going back to the Economic Table, we 
see that it was necessary for the hunter to 
protect himself and he needed no regulation in 
dividing his game. Hence, he needed no 
government. "Might was right." That was 
the law and government of the savage. 

With the semi-civilized man, it was con- 
venient for several families to work together 
and divide the product of their flocks and 
herds. As an illustration, take a valley twenty 
miles long with five places of exit. Five fam- 
ilies working together, one family at each exit, 
could control the entire valley. Since the 
exits were guarded the flocks and herds could 

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Economics 

roam up and down the valley. In order for 
the families to subsist it would be necessary 
to divide the product of the flocks and herds. 
It was not until man began to till the soil and 
dispose of the products of the earth, that he 
needed the protection and regulation of a 
government. 

Again following the Economic Table, taking 
the first law through its various branches. It 
was shown that the hunter required no govern- 
ment. The blacksmith welded his chain by 
using the muscles of his arm or by manipulat- 
ing a machine. The guard must be a govern- 
ment unto himself while all the governments 
that ever existed could not add a column of 
figures. 

Following the second law through its vari- 
ous branches, the stock raiser, the railroad 
man, the banker and the teacher, can all be 

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, Economics 

assisted with the aid of government. Yet, the 
stock raiser might be called upon to turn his 
herd single handed and alone, in order that 
they may not escape from him. The railroad 
man must solve many difficult problems, un- 
aided and alone. In many cases, the banker 
has no one to assist him in guarding the prop- 
erty under his care. While, every teacher 
knows that any school may be a little world 
of its own. 

The farmer needed the protection and reg- 
ulation of a government when he began to till 
the soil. The architect, the lawyer, and the 
doctor needed the protection and regulation 
of a government when thqy began to charge 
for their services. The financier needed the 
protection and regulation of a government 
when he arranged his investments so that they 
yielded him an income. Hence, we can draw 

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Economics 

the conclusion, that civiHzed man needs gov- 
ernment protection and regulation when he 
places professional work on a icommercial 
basis. 

As the world advances it draws farther and 
farther away from the law of material. That 
is, the material in the mine and in the forests 
is constantly decreasing. In order to subsist, 
the world must turn more and more to pro- 
ducts gained by invention, which is mostly 
professional work. Hence, it is necessary to 
bring our daily affairs more and more under 
the control and regulation of the govern- 
ment. 

As previously shown, taxation is a sum 
collected for the support of governments. 
Under existing conditions, taxation has be- 
come quite complicated. It is also closely 



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Economics 

allied with tariff. These two conditions will 
be treated separately. 

As previously shown, the second function 
of government is to regulate. This has been 
accomplished by the government establishing 
standards. Different governments use differ- 
ent amounts but in principle all standards are 
the same. The question uppermost in the 
mind of every person today is: the high cost 
of living. Practically, the high cost of living 
is due to the fact that the government has out- 
grown its present system of weights and meas- 
ures. That is, with its present system of 
weights and measures the government is no 
longer able to regulate commercial conditions. 

The only form of business, that seems to 
promise any relief, is the commission form of 
business. But, before the commission form of 
business is possible it will be necessary for the 

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Economics 

government to extend our present system of 
weights and measures. That is, in the com- 
mission form of business everything must be 
bought and sold according to standards set by 
the National Government. It would be neces- 
sary to extend our present system of weights 
and measures so as to cover all fruits, nuts, 
vegetables, grains and meats. In the case of 
manufactured articles, in many cases, the 
manufacturer must meet conditions that it 
would be difficult and costly to standardize. 
To add to their beauty and usefulness, all 
manufactured goods are colored or painted. 
The consumer is not interested in the method 
of manufacture. All the consumer cares to 
know is, that the goods are, what the manu- 
facturer says they are. That is, if A. is a 
shoe manufacturer and offers a shoe for sale 
that he marks as being all leather, the shoe 

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Economics 

must be all leather. At the same time he may- 
be making shoes that are part paper or shoes 
that are canvas. If B. is a cloth manufacturer 
and manufacturers a piece of cloth that he 
marks as being all wool, the cloth must be all 
wool. At the same time B. may be manufac- 
turing cloth that is part wool and part cotton 
or cloth that is all cotton. But, if A.'s shoes, 
that he has marked as being all leather, are 
found to be part paper, or B.'s cloth, that he 
has marked as being all wool, is found to be 
part cotton, both A. and B. are liable to 
government prosecution and to such punish- 
ment as the government sees fit to mete out to 
them. 

In order that the commission form of busi- 
ness may be conducted successfully, all busi- 
ness must originate with the consumer. The 
consumers order from the commission man 

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Economics 

what they want and the commission man gets 
it for them. It is simply quick sales and small 
profits. Every merchant knows, that is his 
most profitable business. In the commission 
form of business, since it is the duty of the 
government to protect and regulate, it would 
be necessary for the government to control all 
places where grain or food is stored. This 
would mean all grain elevators and cold stor- 
age plants. 

There is no denying the fact that the farm- 
ers work hard for the products that the earth 
gives them. But, does not the mill man work 
just as hard to produce machines for the 
farmers to use? If it is necessary for the 
government to protect and regulate conditions 
for the farmer, is it not just as necessary that 
the government protect and regulate condi- 
tions for the wage earner ? 

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Economics 



CHAPTER XIII. 
Taxation. 

As previously stated, taxation is a sum 
charged or collected for the support of gov- 
ernment. As previously shown man's wants 
are luxuries, conveniences and necessities, 
hence, his taxes must be arranged accordingly. 
During prosperous times, luxuries will yield 
a certain amount of taxation. That is, peo- 
ple desire many things that are neither con- 
venient or necessary and when they can af- 
ford it, financially, the people will purchase 
these articles. But, during times of depres- 
sion, the use of luxuries decreases. If the de- 
pression is long and severe, the use of lux- 

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Economics 

uries may entirely cease, hence, all taxation 
from luxuries would cease. From this, we 
see that the first condition in taxation is : — 
that luxuries cannot be depended upon to 
yield taxation. 

The conditions that are true of luxuries are 
likewise true of conveniences. In times of 
depression, people deprive themselves of many 
conveniences. Hence, the amounts received 
from the sale of conveniences decrease and the 
amount of taxation will likewise decrease. 
The second condition in taxation is : — That 
the amount of taxation derived from conveni- 
ences will decrease during times of depres- 
sion. The conditions that are true in regard 
to conveniences are likewise true in regard to 
incomes and salaries. In times of depression, 
all incomes and salaries decrease and many 
incomes and salaries entirely cease. Hence, 

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Economics 

in times of depression, the amount of tax de- 
rived from incomes and salaries must like- 
wise decrease. 

The third condition in taxation is: — that 
during times of depression, in order to sup- 
port itself, the government must depend 
largely or entirely upon taxation derived from 
necessities. In many cases, it is necessary to 
determine the use of an article before it is 
possible to determine whether it is a luxury, 
a convenience or a necessity. The average 
farm horse may be a necessity, a convenience 
or a luxury, depending entirely upon how the 
horse is used. If the horse is used to drag 
the farm implements, in cultivating the soil, 
or to draw the crops to market, the horse is a 
necessity. If the owner wishes to go to a 
neighbor's house, a mile away, and rides the 
horse in preference to walking, the horse is a 

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Economics 

convenience. If the horse is hitched to a 
pleasure vehicle and driven for pleasure, the 
horse is a luxury. 

Taking another illustration, A., B. and C. 
each owns an automobile. A. uses his auto- 
mobile entirely for pleasure. B. uses his auto- 
mobile to travel back and forth to his office, 
when he might use a street car. C. uses his 
automobile to take goods to his customers or 
material to his workmen. A.'s automobile is 
a luxury, B.'s automobile is a convenience, 
and C.'s automobile is a necessity. 

Nearly all articles conform to the same con- 
ditions. Hence, we can readily see that it 
depends very largely upon how an article is 
used as to whether that article is a luxury, a 
convenience or a necessity. To carry the il- 
lustration of A., B. and C. a step farther. In 
times of depression, A. can advance many rea- 

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Economics 

sons why he should no longer own an auto- 
mobile. His desires for automobiles may- 
have been satisfied. His friends and associ- 
ates may no longer have automobiles. The 
roads may have been allowed to deteriorate 
so that there is no longer any pleasure in driv- 
ing an automobile. He could advance any 
number of reasons why he should not keep an 
automobile, but, the fact is he does not keep 
an automobile so the government has no 
chance to tax him for keeping an automobile. 
In the case of B., business depressions may 
develop many reasons why he should econo- 
mize. He finds that it costs about five cents 
per mile to ride in an automobile and about 
one cent per mile to ride in a street car. He 
denies himself the convenience of riding in an 
automobile. He rides in a street car and 
saves the difference between the automobile 

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Economics 

fare and the street car fare. But, he no 
longer owns an automobile, so there is no 
longer any chance to tax him for owning an 
automobile. C.'s automobile is part of his 
business, hence, he is compelled to keep it. 
Consequently, the government has a chance to 
tax him for keeping it. Since the government 
is compelled to depend upon necessities for 
its tax or revenue, it is to the interest of the 
government to arrange necessities so that they 
will yield the largest possible amount of taxa- 
tion. 

If we wish to understand the principles of 
taxation it will be necessary to adhere closely 
to conditions. The earth, man and many other 
conditions existed before governments became 
necessary. Since the function of the govern- 
ment is to protect and regulate, logically, the 
government only should tax those conditions 

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Economics 

that require government protection and regu- 
lation. 

Taxation of Mining Companies: — In their 
natural condition, hid in the earth, minerals re- 
quire neither government protection nor gov- 
ernment regulation. Hence, minerals should 
not be taxed for the support of governments. 
Mining companies do require the protection 
and regulation of governments, hence, mining 
companies should be taxed for the support of 
governments. The question then arises, how 
should mining companies be taxed? Minerals 
may be taxed by using either one of three 
methods. They may be taxed on an acreage 
basis; they may be taxed on a tonnage basis, 
or they may be taxed on a valuation basis. As 
previously shown, minerals yield no return 
until the time of mining. At the time of min- 
ing, the profit must be sufficient to pay all 

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Economics 

previous expenses. If taxed on an acreage 
basis, the same area may be taxed year after 
year but since the mineral can yield no return 
until the time of mining, the tax must simply 
accumulate. That is, taxing on an acreage 
basis, is simply creating a debt that future 
generations must pay. If the time of mining 
is far distant, the accumulated debt, that must 
be obliterated by a profit at the time of mining, 
may be so great that the minerals cannot be 
used for commercial purposes. If the com- 
panies are taxed on a tonnage or valuation 
basis there is no tax due until the mineral is 
mined. At the time of mining, a certain sum 
is charged for taxation which in reality be- 
comes a part of the cost of production. All 
the facts point to the logical conclusion, that 
mining companies should be taxed on a ton- 
nage or valuation basis and not on an acreage 

basis. 

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Economics 

Valuation of Property: — The valuation of 
property can always be determined, either 
from what the property will produce, from 
what the property will yield, or from what the 
property will earn. The produce or earning 
power of the property can be converted into 
cash. After deducting all necessary expenses, 
the balance represents the interest on the val- 
uation. There is an exception to this in the 
case of mineral lands. This exception has 
been previously explained. 

Ownership. 

Economically, we must recognize two classes 
of ownership; absolute ownership and condi- 
tional ownership. The merchant buys and 
sells but he buys and sells absolutely. That is, 
when a merchant buys goods, the goods be- 
long to him and he may do absolutely as he 

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Economics 

pleases with them. He may sell them, he may 
give them away, he may consume them, or, he 
may destroy them. No person has any right 
to question the disposition that he makes of 
his own goods. The real estate man buys and 
sells property, but he always buys and sells 
conditionally. That is, all property is bought 
and sold subject to taxation and taxation is 
imposed on all property for the support of the 
government. Thus, for the purpose of taxa- 
tion, the government must know the valuation 
of all property. 

Different governments have used different 
methods to determine the valuation of prop- 
erty. One method is for government officials 
to place valuations on all property for the pur- 
pose of taxation. This is neither a small nor 
a pleasant task, as property owners are con- 
tinually appealing to the courts for adjust- 

143 



Economics 

ment of valuation. The method has Hkewise 
brought abandoned farms in the country and 
slums in the cities. 

In the country, land is used to produce farm 
products while in the cities it is used as sites 
for buildings. This necessitates using differ- 
ent methods in placing valuations on country 
property and city property. Economically, in 
the country, the land must be valued in pro- 
portion to what it will produce, or what it can 
be made to produce. In the city the land must 
be valued in proportion to what it will earn or 
what it can be made to earn. Since the gov- 
ernment values land for taxation purposes, 
economically, it is to the interest of the gov- 
ernment to make country land produce as 
much as possible, and to make the city land 
earn as much as possible. 

There is but one answer to the cause of 

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Economics 

abandoned farms in the country and slums 
in the cities, that is, excessive taxation. It is 
known to country people, that hill land and 
mountain land will not produce as large crops, 
using an equivalent amount of labor, as river 
bottoms will produce. Another fact that is not 
so generally known is: — that land in some 
geological formations will not produce as 
much as land in other geological formations, 
other conditions and locations being similar. 
If land is taxed for more than it will produce, 
it is taxed excessively and the farmer must 
abandon the farm either by moving to another 
locality or by entering other lines of employ- 
ment. That is, if it takes all the farmer can 
raise to pay the taxes on the farm there is 
nothing left to compensate the farmer for his 
labor. 

Slums in cities are the result of growth, or 

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Economics 

rather the lack of growth. At some period, in 
the history of the city, the slum district was 
the leading part of the city. But, this may 
have been when the city was merely a country 
village. Other parts of the city grew, but the 
slums remained stationary. In many cases, 
the properties pass from one generation to 
another generation by inheritance. The in- 
come from the property is all the people who 
own the property have to live upon. A half 
loaf is better than no bread and the income 
from a delapidated property is better than no 
income. 

Since the government values land for taxa- 
tion purposes, it makes no difference to the 
government who owns the land or who pays 
the tax ; as long as the land is yielding or earn- 
ing all that it can be made to earn ; thus, yield- 
ing the greatest amount of taxation. 

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Economics 

Since the government is interested only in 
taxation and not in valuation, some govern- 
ments have adopted a different method for de- 
termining the valuation of property. Instead 
of government officials determining the value 
of properties, each property owner determines 
the value of his own property. The govern- 
ment stipulates that he must sell the property, 
for cash, at the valuation given providing any 
person wishes to buy the property. This sys- 
tem will permit of different developments. If 
the property is sold, at the stated valuation, it 
simply means a transfer of ownership and the 
government has gained nothing in the way of 
taxation. But, if the transfer were made at 
valuation given plus ten per cent and the taxa- 
tion determined on the new valuation, then the 
government would have cause to insist on the 
transfer. 

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Economics 

In the rural districts, this method would 
tend to keep land of inferior fertility under 
cultivation, for the land would be taxed ac- 
cording to its producing value. In the cities, 
the method would tend to eliminate the slums. 
As previously stated, slums in cities are 
formed by a lot of buildings that have outlived 
their usefulness. In nearly every case, the 
buildings are owned by people who have not 
the means, financially, to replace the present 
buildings with buildings suitable to meet pres- 
ent requirements. In addition, the slums are 
usually situated in the most valuable part of 
the city. 

There is no reason why valuable city prop- 
erty cannot be owned and controlled by cor- 
porations the same as other property is owned 
and controlled by corporations. In many slum 
districts, it might be necessary to combine 

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Economics 

several properties before a plot, large enough 
to meet the requirements, could be secured. 
Taking the valuation of these properties from 
the government records, suitable buildings 
could be arranged to make the slum district 
the most valuable part of the city. The pres- 
ent owners could be paid in cash or given se- 
curities in the enterprise. 

Tariff: — A tariff may be considered as a 
financial wall, or dam, thrown around a coun- 
try to protect its industries, during a certain 
stage of national development. Since it was 
necessary for primitive man to live from the 
products of the earth, probably the first class 
of people to need government protection and 
regulation were the farmers. The farmer 
needs many articles that he cannot produce 
and his only method, is either to buy or ex- 
change for these articles. If he buys, he must 

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Economics 

likewise sell, otherwise he has no money to 
pay his bills. If he simply exchanges, he has 
no money to pay his taxes. The workings of 
a nation are similar to the workings of an 
individual except that they are conducted on 
a much larger scale. In the early stages of 
its development a nation does exchange for 
many articles that it cannot produce but it 
must be able to secure a certain amount of 
cash in order to meet its financial obligations. 

During the early stages of its development, 
every nation has been compelled to borrow 
money from outside sources. If it simply ex- 
chanofed articles the interest on borrowed 
capital was a constant drain on the finances 
of the country. 

Closely allied with the finances of the coun- 
try are, the manufacturing interests. The 
home manufacturer was compelled to have 

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Economics 

plant and material before he could manufac- 
ture. These articles were invariably procured 
by means of borrowed capital. The home 
manufacturer might be able to meet the for- 
eign manufacturer on an exchange basis. But, 
it was necessary for the home manufacturer 
to sell a certain amount, for cash, in order to 
be able to meet the interest on his borrowed 
capital. Otherwise, the interest on his bor- 
rowed capital would drive him out of business. 
What the home manufacturer needed was a 
condition that would allow him to sell his 
manufactured articles, in his own markets, 
for less than the foreign manufacturer could 
sell similar articles and at the same time allow 
the home manufacturer sufficient profit so that 
he could pay the interest on his borrowed cap- 
ital. This condition was brought about by the 
government establishing a protective tariff. 

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Economics 

Literally, the government said to the foreign 
manufacturer, that if he wanted to trade in 
these markets it would be necessary for him 
to pay the government a certain sum for the 
privilege. This sum was turned into the na- 
tional treasury. 

At this point it will be necessary for us to 
balance our books. Interest on outstanding 
loans is against the country. But, the coun- 
try is using its own manufactured articles to 
develop its own resources, and selling food 
products. The one condition practically bal- 
ances the other condition. A country can de- 
velop, by means of a tariff, so long as these 
conditions prevail. But, as soon as a nation 
becomes a lender instead of a borrower or 
consumes all its food products then a tariff 
becomes a detriment instead of a benefit. 

If a nation lends more than she borrows the 

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Economics 

amount of interest she receives is greater than 
the amount of interest she pays. Consequent- 
ly the nation has an income from the interest 
on her loans. At the same time if she sells 
manufactured products and food supplies the 
nation is in a position to dictate her own 
prices, hence, a tariff can no longer protect. 

On the other hand, if a nation must pay 
interest on outstanding loans and buy food 
supplies she is compelled to sell manufactured 
articles or become bankrupt. A tariff will in- 
crease the price of her manufactured articles 
and likewise increase the cost of her food sup- 
plies. Increase in the cost of manufactured 
articles decreases the sales and increase in the 
cost of food products is a direct increase in 
expenditures. Hence, a tariff becomes a 
detriment. 



Economics 



CHAPTER XIV. 
Wage Earners. 

The world has produced three classes of 
workmen; the freeman; the servant; and the 
slave. The freeman controls his own busi- 
ness affairs and is compensated by the direct 
returns of his business. The servant receives 
a salary and in return for the salary allows 
his services to be controlled by other persons. 
The services of the slave were legally con- 
trolled by other persons. That is, slavery, as 
it existed, was nothing more than one class of 
persons legally controlling another class of 
persons. For many years, slavery has been 
abolished by all civilized nations, so that today 
we have but two classes of workmen. 

154 



Economics 

The freeman is allowed to control his own 
business, but his compensation varies. As an 
illustration, "A" begins business on January 
first, with a capital of One Hundred Dollars, 
and remains in business for one year. At the 
end of the year, he is in either one of three 
conditions. He has more capital than he had 
when he began; he has as much capital as 
when he began ; or, he has less capital than 
he had when he began. In the first condition, 
suppose at the end of the year, he has One 
Hundred and Fifty Dollars. Fifty Dollars 
represents the pay for his work. In the sec- 
ond condition, he has but One Hundred Dol- 
lars ; hence, he has worked for nothing. In 
the third condition, suppose he has Fifty Dol- 
lars; he has not only worked for nothing, but 
he paid Fifty Dollars for the privilege of 
working. 

155 



Economics 

Before power was applied to manufactur- 
ing, nearly all business was conducted by this 
method. Today, many small transactions are 
conducted according to the same principle. 
This method produced the condition of mas- 
ter and servant, and gave rise to the appren- 
ticeship system. In the apprenticeship system, 
the apprentice was to serve for a certain pe- 
riod of time. At the end of that time, he was 
supposed to be a master workman. History 
proves that the system did produce many good 
workmen. 

When power was applied to manufacturing 
and corporations were formed, a new condi- 
tion developed. It was found advisable to pay 
all corporation employees a salary. By using 
this arrangement, the condition of master and 
servant disappeared and the new condition of 
servant dealing with servant developed. 

m 



Economics 

The Instruction of Workmen. 

In the case of master and apprentice, the 
master was the instructor. In the case of cor- 
porations, if each employee is allowed to de- 
velop his own method in his own way, it will 
lead to endless confusion and very little actual 
work. If the world is to advance, it must be- 
gin in the morning where it left off the night 
before. This would imply continual instruc- 
tion on the part of the younger workmen. 
Since there is no one else to furnish this in- 
struction it will be necessary for the corpora- 
tion to furnish it. It might add to the useful- 
ness of the method, if the younger workmen 
were charged something for instructions. 

The Protection of Workmen: — In the 
training of large bodies of men, the old time 
apprenticeship system has proven itself to be 
defective. Conditions have arisen where all 

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Economics 

interests concerned need government protec- 
tion and government regulation. 

In order to perform the tasks required of 
them, some employees must be given legal 
powers that are denied to other employees. 
The duties of the foreman is to direct the 
work. In order to properly direct the work, he 
must be able to control the working forces. The 
using of brute force, in controlling workmen, 
is a condition of the past. The foreman is a 
part of the corporation and the corporation is 
a part of the government. Hence, if the fore- 
man needs assistance, the logical place for ob- 
taining this assistance is from the government. 
From this we see, that since it is necessary for 
the foreman to invoke the aid of the govern- 
ment it is likewise the duty of the government 
to provide the foreman with a legal method of 
discharge. 

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Economics 

The mails and the telegraph are extensively 
used in many business transactions. This 
places many business affairs into the hands of 
disinterested people. Not saying that these 
people are careless, negligent, or incompetent, 
but merely that they are disinterested. The 
■address is wrong on an important letter or a 
missent telegram leads to complications. In- 
variably these complications first manifest 
themselves among the working force. The 
workmen get blamed and in many cases dis- 
charged. In order to protect the workmen 
from injustice, it is likewise necessary for the 
government to provide the workman with a 
legal right to a hearing. After all interested 
parties have had a legal hearing, if it is shown 
that the workman is incompetent, either physi- 
cally, commercially or intellectually, to per- 
form the tasks required of him, it is to the in- 

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Economics 

terests of all parties concerned that he should 
be removed. But, if the workman is thor- 
oughly competent to perform his tasks and is 
simply the victim of some other person's blun- 
der, then the government must place the blun- 
der where it belongs. 

The Promotion of Workmen: — All labor 
seems to divide itself into three general 
classes. The total product is the combined 
product of many workmen. The work re- 
c[uired, becomes part of a system; or, the sin- 
gle article is the combined efforts of many 
workmen. The work of the different corpora- 
tions practically follows along these lines. 

The work of the mining companies, practi- 
cally, follows the first condition. A car of 
coal is the product of many workmen. The 
work of railroad men, practically, follows the 
second condition. Each workman becomes a 

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Economics 

part of the system. The work of the steel 
companies, practically, follows the third con- 
dition. A bridge or steel structure is the com- 
bined efforts of many workmen. Each work- 
man, or class of workmen, only performed a 
part. 

Observation shows that the work of the 
miner is largely physical ; the work of the rail- 
road man is largely commercial; that is, part 
physical and part intellectual. The work of 
the steel man is largely intellectual. Inferior 
work at any point may render the whole struc- 
ture useless. 

This gives another method of classifying 
labor, namely, physical, commercial and intel- 
lectual. This classification permits labor to be 
divided into third class, second class and first 
class. In addition, there are skilled mechanics, 
or workmen who perform the entire task and 

161 



Economics 

produce a complete article. These workmen 
might be termed master workmen. This ar- 
rangement would give four classes of work- 
men; namely, third class workmen; second 
class workmen ; first class workmen ; and mas- 
ter workmen. 

Promotion of Officials. 

Three methods present themselves either of 
which may be used in promoting officials. 
Each method produces a different effect upon 
the official or operating force. These meth- 
ods are : — the line organization ; the staff or- 
ganization; and competitive examinations. In 
the line organization, each official is promoted 
according to his position in the organization. 
In the staff organization, men are chosen to 
fill certain positions irrespective of other con- 
ditions. Both of these methods are so defec- 

162 



Economics 

tive as to be practically useless. In the line 
organization, sooner or later, some one will 
get in line who cannot advance or will not ad- 
vance. The result is, that eventually the en- 
tire working force will be reduced to the in- 
telligence of the one who will not advance. 
There is no method provided to get past him 
and the line dare not be broken. 

In the Staff Organization, it immediately 
leads to disorganization. The whole organi- 
zation becomes suspicious and disloyal for 
they do not know at what instant someone 
will be advanced over them. This leaves but 
one practical method, that of competitive ex- 
aminations. By using competitive examina- 
tions the entire force is eligible for advance- 
ment. Working standards can be set and 
maintained, for every person proved that he 
is capable of performing the required duties 

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Economics 

before he was eligible for appointment. In 
case several persons become eligible for the 
same position at the same time, it might be 
found necessary to choose one of the number 
by lot. 

Compensation of Workmen: — The condi- 
tions of rents, taxes, wages and cost of pro- 
duce, or living expenses, are so related that to 
change one will automatically change the 
other. As previously explained, it is the work- 
ing of the peculiar mathematical condition 
where the quantities vary and the ratio varies. 
This condition cannot be figured satisfactorily 
by using the ordinary rules of arithmetic. 

Using the ordinary rules of arithmetic, high 
wages and high cost of living are better for 
the wage earner, than low wages and low cost 
of living. As an illustration — "A" receives a 
salary of Twenty-five Dollars per week and 

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Economics 

his living expenses are Twenty Dollars per 
week. By this arrangement he saves Five 
Dollars per week. Double his salary and dou- 
ble his living expenses and he saves Ten Dol- 
lars per week. Cut his salary in half and his 
living expenses in half, and he saves but Two 
Dollars and fifty Cents per week. 

The manufacturer, or employer of labor, is 
compelled to operate along the line of great- 
est profit. The higher the wages, the lower 
the line of profit, until the manufacturer 
reaches the point where it is more profitable 
for him to sell the raw material and employ 
no labor for manufacturing. Hence, high 
wiages tend to produce goods of inferior qual- 
ity. As an illustration, "A" is a manufacturer 
and can sell an article for ten dollars. By do- 
ing an additional amount of work the value 
of the article can be increased to fourteen dol- 

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Economics 

lars. But, this additional work costs five dol- 
lars. Hence, it is more profitable for "A" to 
sell his article for ten dollars than it is to do 
the extra work and sell the article for four- 
teen dollars. 

As previousy explained, the workman pro- 
duces wealth, but is paid in capital. Hence, 
the workman is constantly subjected to the 
fluctuations in the value of capital or the 
change in prices. 

These fluctuations can be regulated by 
means of a constant wage. As previously ex- 
plained, an able bodied man working on a plot 
of ground for a period of ten hours, and de- 
voting his energies to the cultivation of wheat, 
will produce one and three-fourths bushels. 
One and three-fourths bushels of wheat, or 
its cash equivalent, then becomes our stand- 
ard of value for ten hours of unskilled labor. 

166 



Economics 

All other labor can, then, be regulated in terms 
of unskilled labor. 

The freight on one bushel of wheat from 
the northwestern part of the United States or 
the southwestern part of Canada to Liver- 
pool, England, is less than one cent per bushel. 
Such being the condition, it might be possible 
to establish a uniform rate for the entire coun- 
try. At present, we lack experimental data, 
but assuming that the rate is uniform for the 
entire country. 

Using this method, it will be necessary for 
the government to set, or establish the price 
of wheat at certain stated periods. If it is 
necessary to increase the price of wheat, rents, 
taxes, freight rates, wages and all forms of 
produce increase in proportion to the increase 
in the price of wheat. If it is necessary to de- 
crease the price of wheat, then rents, taxes, 

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Economics 

freight rates, wages and all forms of produce 
decrease in proportion to the price of wheat. 
That is, all values increase or decrease, in 
equal proportions. The only permanent con- 
dition being that ten hours of unskilled labor 
is always worth one and three-fourths bushels 
of wheat or its cash equivalent. 

National Employment Bureaus: — In some 
ages of the world, a man who was out of em- 
ployment, or constantly getting out of employ- 
ment, was considered as being defective. 
Under modern conditions, that consideration 
is no longer true. In all lines of construction 
work, first class men may get out of employ- 
ment, at any time, and nearly all farmers need 
additional help during the harvest season. The 
difficulty seems to be in getting the right man 
and the right job together. 

The wheat pit acts as a clearing house for 

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omtcs 



the farmer. The board of trade acts as a 
clearing house for the manufacturer. The 
stock exchange acts as a clearing house for 
the financier, and the university acts as a 
clearing house for the intellectual man. The 
working man has no clearing house for his 
labor. The working man must spend valuable 
time in searching for employment; and the 
employer of labor must spend valuable time 
in searching for help. 

An economical arrangement to solve this 
difficulty is a national employment bureau. 
This would act as a clearing house for labor. 

Several conditions arise in connection with 
the operation of a national employment bu- 
reau. All work must be standardized, and it 
would be necessary for the bureau to estab- 
lish and maintain its own system of standards. 
The bureau, being responsible to both the em- 

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Economics 

ployer and the employee, must be familiar 
with local conditions. 

Environments or surroundings will con- 
stantly need to be considered. Not only must 
the workman be capable of performing the 
tasks required of him, but he must also be 
able to perform the tasks required of him. As 
an illustration, men who work underground 
are very susceptible to climatic changes. In 
the winter time, the weather is too cold, and 
in the summer time the weather is too hot for 
these men to work in the open air. Even 
though they know how to perform the tasks 
required of them, mill men and office men are 
of little value to the farmer, during harvest 
time. They are unable to withstand the ef- 
fects of the sun. Economically, if a national 
employment bureau is properly conducted it 
will save much valuable time for all parties 

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JSconomics 

concerned. In order not to be a burden to the 
tax payers, those using the bureau would be 
charged a fee sufficient to make the bureau 
self sustaining. 



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Economics 



CHAPTER XV. 

Insurance. 
As previously explained, in all transactions 
there is a certain amount of risk that cannot 
be avoided. This risk has been eliminated, to 
a certain extent, by means of insurance. Lit- 
erally, insurance is helping to bear each others 
burdens. The farmer must continually risk 
his crops against storm, drought, and frost. 
Annually the losses, or supposed losses from 
these sources, amount to hundreds of millions 
of dollars. So regular are the occurrances and 
so severe the losses, that no method has ever 
been evolved to compensate the farmer for 
these losses, by means of insurance. In the 
risk of storms, drought and frost, each farmer 
bears his own individual loss. 

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Economics 

Calling the amount paid for insurance the 
rate, in the case of storms, drought, or frost, 
the rate would necessarily be so high that in- 
surance would not be profitable. Practically, 
insurance has narrowed itself into three 
classes. Fire Insurance, Accident Insurance, 
and Life Insurance. 

In fire insurance, different methods have 
been evolved. In some communities, the peo- 
ple band together for mutual protection. In 
such a case no rates are charged, but in case of 
a fire, each member of the company, is as- 
sessed a certain amount. Another method is 
to form stock companies, where certain rates 
are paid and no assessment charges are made. 
In cities and towns where paid fire companies 
are maintained, generally, the property owners 
pay two rates for fire protection. They pay 
one rate, to the insurance company, for insur- 

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Economics 

ance, and they pay another rate, in the form 
of tax, to support the fire company. 

The rate of insurance will vary in accord- 
ance with the material of which a building is 
constructed; the location of the building; and 
the use of the building. Usually the rate of 
insurance is higher for buildings constructed 
of timber than it is for buildings constructed 
of steel, stone or brick. The rate of insurance 
will be higher where frame buildings are built 
so closely together that a fire in one building 
may be communicated to other buildings, than 
it would be if each building were isolated. 
In regard to the uses of buildings; mills and 
factories usually pay a higher rate of insur- 
ance than is charged for dwellings. 

Accident Insurance: — Accident Insurance 
has expanded until it embraces shipments of 
goods, either by railroad or ocean; packages 

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Economics 

sent by mail; as well as injury to persons. 
Since very few of the articles insured are in- 
jured or destroyed, the rate of insurance can 
be made very low. Yet, the total amount col- 
lected must be sufficient to pay all damages or 
injury. 

Life Insurance: — Life Insurance is an 
agreement between an individual and a corp- 
oration. The individual agrees to pa)^ the 
corporation a certain sum annually. In re- 
turn, for this payment, the corporation agrees 
to pay a certain specified sum, to some person 
specified in the agreement, provided the person 
who is insured dies before a time specified 
in the agreement. 

In Life Insurance there are two general 
methods used. One method is to pay a cer- 
tain sum annually, so long as the insured per- 
son lives. The other method is to pay a 

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Economics 

certain sum, annually, for a specified number 
of years. At the end of which time, a settle- 
ment is made, provided the person insured 
does not die in the meantime. 

In case the person insured dies before the 
time specified in the agreement, then the en- 
tire settlement is made at the time of death. 

The Advantage and Disadvantage of In- 
surance : — Insurance is always a sum paid 
for an uncertainty. Buildings may stand un- 
til they fall from decay, and be insured for 
the entire time. On the other hand, buildings 
may scarcely be completed before they are 
destroyed by fire. In this case, the insurance, 
on the buildings that have stood for many 
years, helps to pay for the total loss on the 
new buildings. Likewise, in the transporta- 
tion of freight, the insurance on freight that 
arrives safely at its destination, helps to pay 

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Economics 

for freight that is accidentally lost or dam- 
aged. Accidents to persons usually render 
them unfit to follow their usual occupations, 
so that insurance may be the means of allevi- 
ating much suffering. 

The advantages derived from life insurance 
are somewhat different. Primarily the ad- 
vantage of life insurance is to meet a financial 
condition where if everything goes right, 
everything will end right. But, if the person 
interested should die in the meantime, inno- 
cent people would be made to suffer. That is, 
by insuring their lives, students ma.y safely 
borrow money to complete their education; 
money may be borrowed for business pur- 
poses ; or marriage relations entered into. 

The foregoing are the advantages of insur- 
ance, but there are likewise disadvantages of 
insurance. A building may catch fire and 

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Economics 

burn from a perfectly natural cause, but the 
owner must be able to prove clearly what this 
cause was. If he is unable to do so, in addi- 
tion to forfeiting his insurance, he may have 
to stand trial, in court, on either of two 
charges. He may be charged with setting his 
building on fire, or he may be charged with 
criminal negligence. Either is a penitentiary 
offence. 

In the case of freight or merchandise, it 
may be charged that the freight was insured 
for more than it was worth and then wilfully 
destroyed in order to obtain the insurance. 

Accident insurance, in regard to humanity, 
divides into two parts — persons insuring 
themselves and workmen insured by corpora- 
tions. A person may insure himself against 
accident. The worst charges that can be 
brought against him is that he wilfully injured 

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Economics 

himself or allowed himself to become injured. 
When corporations insure workmen, a differ- 
ent condition arises. Since the corporation 
pays the insurance it is an additional amount 
added to the cost of production; hence an 
added burden to the consumer. Insurance 
may likewise breed a false sense of security in 
the workmen and make them careless or negli- 
gent. 

In life insurance, if a person insures his 
own life and cause of death cannot be clearly 
proven, the worst charge that can be made 
against him is suicide. With some companies, 
a charge of suicide is sufficient to invalidate 
the insurance. If one person insures another 
person's life, the case may be different. As an 
illustration, a parent insures a child's life and 
the child dies in a mysterious manner but from 
perfectly natural causes. While the parent is 

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Economics 

perfectly innocent of any crime, the parent 
may be compelled to stand trial for murder. 
If convicted, the .parent may be compelled to 
pay the penalty for murder. 

We see that a person who is dealing with in- 
surance needs to be careful. Then the disad- 
vantages of insurance may be avoided. When 
insurance is properly conducted, the advan- 
tages far outweigh the disadvantages. The 
many who are not injured, help to compensate 
the one who is injured, knowing that in case 
of injury they will receive like compensation. 



mo 



Economics 



CHAPTER XVI. 

Scientific Management. 

There may be more pathos than poetry in 
the old song, "Tomorrow will be Friday and 
we caught no fish today". There is little need 
for management in the humble lives of the 
fisher folks. Yet, no fish might mean no food 
and no food might mean starvation. The 
fisher folks have to conform their lives to the 
elements and conditions that surround them. 
There is little chance for them to arrange the 
elements to suit their lives. 

In times past, men forsook the humble toil 
of the fisherman and engaged in other forms 
of occupation. As the world advanced, what 
is known as scientific work appeared and later 

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Economics 

came scientific management. Perhaps the 
ancient prophets, when they foretold the 
future, were simply scientific men using scien- 
tific methods. Today if a person told you that 
in our Northern clime, it would be hot in July 
and cold in January and that in the Southern 
hemisphere, the people would be harvesting on 
Christmas and going sleighing on the Fourth 
of July, we would not call him a prophet. If 
we called him other than well informed, we 
would say that he is a scientist. 

The scientist then determines conditions and 
events by means of certain laws. Laws always 
mean order. Hence, Science must be order 
and scientific management must be orderly 
management. So long as each person worked 
by themselves and for themselves, there was 
little need for management. As the size of 
the task and the number of people required to 

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Economics 

perform the task increased, management be- 
came an important factor. When machinery 
was introduced, management became the ab- 
sorbing question. 

To try to regulate the actions of workmen 
by means of a stop watch until the work- 
men fall from exhaustion is not scientific 
management. That is simply brute force 
worse and more of it. Yet science can be 
used in management with profitable results. 
Beginning with mining companies, they must 
accept their material as they find it. There is 
no chance for any kind of management from 
that source. According to Biblical traditions, 
the ancients found trouble when they at- 
tempted to build a Tower of Babel on the 
Plains of Shinar. Is it any wonder that the 
moderns find trouble when they attempt to 
build a tower of Babel under the ground? 

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Economics 

Everyone, who knows anything about under- 
ground work, knows that a mine is a trap. 
The safety of one person may mean the safety 
of all. If men cannot understand each other 
and cannot understand the orders given them, 
how are they to protect their own lives much 
less the lives of their fellow workmen? Prob- 
ably the first step, in scientific management for 
underground work, would be a uniform lan- 
guage for underground workers. This would 
not necessarily mean the invention of a new 
language. Probably a law, compelling all 
workmen entering any given mine to be able 
to speak and understand the same language, 
vvould do all that is necessary. 

Since the invention of railroads the rail- 
roads have been struggling with a scientific 
condition that still causes trouble. The manu- 
facturer, or producer, must ship his goods to 

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Economics 

the receiver, or consumer, wherever that per- 
son may chance to Hve. From the same 
source, and at the same time, a railroad may 
receive freight for Northern, Southern, East- 
ern and Western points. The student has 
learned from books and the railroad man has 
learned from experience, that two bodies can- 
not occupy the same space at the same time. 
Since all the railroads must constantly receive 
freight, as previously stated, the question that 
is constantly facing the railroad man is; how 
to arrange that freight in an orderly or scien- 
tific manner. The railroads have tried to 
solve this problem by using the hump track at 
the receiving yards. The hump track has not 
proven satisfactory. In the first place, the 
hump track is only a partial solution of the 
difficulty. In the second place, the hump 
track is hard on rolling stock. The difficulty 

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Economics 

can be met satisfactorily by two parallel tracks 
connecting at frequent intervals with cross- 
overs. These tracks should be, at least, long 
enough to accommodate a long train. In oper- 
ation a mixed train is run on one track and an 
engine on the parallel track can be used to 
pick out of the mixed train cars that are 
wanted. In this manner trains can be arranged 
in an orderly or scientific manner. Thus far 
we have seen that the mining man has no choice 
in the matter, and the railroad man is con- 
fined to such close limits that somehow he 
must solve the difficulties. 

Probably scientific management yields its 
largest returns to the manufacturer. The 
manufacturer always works in the Economic 
Law of Production or the Economic Law of 
Increasing Returns. This gives him a greater 
chance to arrange or disarrange the elements 

186 



Economics 

that enter into his manufacturing projects. 
Referring to our previous classification of 
labor, we see that as far as the products are 
concerned, the work of the mining man is en- 
tirely physical. That is, he must take the 
product as he finds it. The work of the rail- 
road man is largely physical and intellectual. 
In intellectual work, the operating railroad 
man is confined to very close limits. 

The work of the manufacturer not only em- 
braces physical and commercial work, but it 
also embraces a more or less amount of intel- 
lectual work. Very often the results of all his 
labor depend upon the intellectual work. Not 
being able to have this intellectual work done, 
in a proper manner, often places the manu- 
facturer in a very embarrassing, if not a 
serious position. 

Different conditions of labor have developed 

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Economics 

different organs of the body. The hunter de- 
veloped the eye and the ear. The commercial 
man developed the muscles of the body. 
Scientific work and inventions have developed 
the brain. In order to reach its present stage 
of civilization, the world has developed several 
classes of workers. Not only do we have 
farmers, mechanics, skilled and unskilled 
labor, but as previously explained, we also 
have professional persons. 

The manufacturer and contractor must not 
only meet physical and commercial conditions, 
but many times they must meet intellectual 
conditions. In intellectual work, what the 
manufacturer and contractor want are facts. 
The question is — how are they to obtain these 
facts? Intellectual work can only be meas- 
ured by results and results can never be ob- 
tained until the work is completed. If a man 

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Economics 

ruins an engine for a contractor, the con- 
tractor knows that the man is incompetent to 
handle the engine, but that does not repair 
the engine. If a man designs a sewer system 
for a town and it will not work, everyone in 
town may know it, but that does not reim- 
burse the injured tax payers. 

Many of these conditions can be traced back 
to our school system. While we spend mil- 
lions of dollars annually in educational work, 
we lack a national educational system. Prac- 
tically each teacher uses their own methods 
and each school district is a unit by itself. The 
fundamental principles of education are the 
same, the country over, yet, we lack in uni- 
form methods of instruction. As previously 
shown, the child needs to be instructed physi- 
cally, commercially, financially and intellect- 
ually. In some cases the child is examined 

189 



Economics 

physically by a physical director or physician. 
The remainder of our educational system is 
simply shooting in the dark. Children are 
started on certain lines of intellectual work, 
but no examination is ever made to determine 
whether or not the child is able or capable of 
understanding what is being taught. Nerv- 
ousness and diseases of the mind abound, yet 
no examinations are made with a view to as- 
sisting the child in its development. 

Experience has shown, that money ex- 
pended for educational work is a very good in- 
vestment. Experience has likewise shown, 
that seed sown in the soil is a good invest- 
ment ; yet, every farmer knows that before the 
seed is sown, the soil must be prepared. If 
money spent for educational work is a good 
investment when the work is done in a hap- 
hazard manner, would it not be a much better 

190 



Economics 

investment if the work were done in a scien- 
tific manner? 

It is known, that skilled physicians can read 
the mind with as much precision as they can 
read the muscles of the body. Such being the 
case, is it not a good investment to have all 
school children examined at least once a year 
by a competent physician? This examination 
to embrace not only the physical, but also the 
commercial, financial and intellectual part of 
the child. If the records are kept, many child- 
hood defects could be detected and probably 
eradicated before the child reached manhood 
or womanhood. In professional work, this 
condition opens a large field for women. A 
woman can understand diseases and condi- 
tions peculiar to children in a way no man 
understands these conditions. 

Among sailors and sea-faring people, a pilot 

191 



Economics 

is a person who guides a ship through a 
tortuous channel. A wrecker is a person who 
takes charge of a ship after it has stuck fast. 
In their professional life, lawyers very often 
must arrange their work to suit the interests 
of their employer. Very often the services 
of a lawyer are not required until his em- 
ployer has a bad legal wreck of some kind on 
his hands. In such cases do conditions per- 
mit the lawyer to use his professional talents 
in their highest capacity? If the employer 
will permit, is not the lawyer who can guide 
his employers' interests, in such a manner as 
to keep them out of the meshes of the law, 
performing a greater service than the lawyer, 
who is simply called upon to try and extract 
his employers' interests from legal entangle- 
ments ? 

The professor has his students. The en- 

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Economics 

gineer has his problems. The doctor has his 
patients, and the lawyer has his dients. These 
men are all chained to the wheel by details that 
they dare not neglect. Yet, the world still 
needs a class of people who can travel for a 
field intellectually, make accurate observations 
and draw correct conclusions. In order to 
accomplish this task, the person must have a 
certain amount of leisure time. With the 
training that they have received, the ministers 
could perform this work. They could secure 
their leisure time by exchanging pulpits with 
each other. 



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Economics 



CHAPTER XVII. 
Panics, Strikes and Wars. 

Panics: — It has been quite definitely 
proven that money bears about the same re- 
lation to industry that blood bears to the body 
or that sap bears to the plant. Any condition 
that will retard or stop the circulation of 
blood will injure or destroy the body and any 
condition that will retard or stop the flow of 
sap will injure or destroy the plant. In the 
same way, any condition that will injure or 
destroy the circulation of money will create 
a panic. 

If we turn to nature we find that she has 
three ways of injuring or destroying her 
products. Nature may injure or destroy her 

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Economics 

products either by storm, by drought or by 
frost. In the case of storm the injury is sud- 
den and may be so great as to destroy the 
plant or so shght as not to permanently injure 
it. In the case of drought, the process is long 
and drawn out. If the plant is young, a 
drought of short duration may seriously in- 
jure it, while if the plant is nearing maturity 
a severe drought of long duration may not 
seriously injure it. The case of frost always 
denotes the point of transformation, where 
growth may be checked or stopped entirely. 
In the case of young plants, a very light frost 
may create serious damage while plants that 
have reached maturity may stand a severe 
freeze without injury. 

As the industries follow the laws of growth, 
conditions affect the industries as much as 
storms, drought and frost affect the plants. 

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Economics 

The conditions may only affect a single indus- 
try ; they may affect a group of industries ; or 
they may affect all the industries. Single in- 
dustries will all submit to this general classifi- 
cation; the construction; the operation; and 
the returns. Sudden inventions or discoveries 
very often affect the industrial world like 
rainbows in the heavens. Industrial plants 
are located, apparently, so as to try to capture 
the pot of gold, at the end of the rainbow. If 
the article, to be manufactured, is some house- 
hold or personal affair, the plant may operate 
successfully until the market or demand for 
the product is supplied and then as there is 
no market, or demand, for the product, the 
plant becomes idle and in many cases value- 
less. Hence, one of the causes of panics is 
destruction of markets. In single plants there 
are a number of conditions that often times 

196 



Economics 

create difficulty, but since they only affect a 
single plant they could scarcely be termed 
panics. Fires, floods or storms may prove ex- 
pensive, but logically they would be accidents 
and could scarcely be termed as panics. 

Groups of industries sometimes occur with 
a leading industry upon which the others de- 
pend. Very often this leading industry is a 
railroad that has been built into a new terri- 
tory. Industries spring up along the railroad, 
but there is not sufficient traffic to support the 
railroad. Consequently the railroad goes 
down and drags the other industries down 
with it. Hence, another cause of panics is 
over-investment. 

If all industries are affected, the panic be- 
comes general and must be caused by some 
general condition. In that case the condition 
causing the panic must be either a created or 

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Economics 

a natural one. The condition causing the 
panic may be adverse or severe legislation 
causing a distrust in the government. Or a 
general panic may be caused by natural causes. 
If for any reason, large bodies of men are so 
employed that they are not producing, sooner 
or later all the money will accumulate in the 
hands of those who are producing. Usually, 
this class of producers are the farmers. Na- 
turally, a panic will ensue until conditions 
again adjust themselves, on a more balanced 
basis. 

Panics may be slight or severe, depending 
upon the conditions that cause them. If the 
panic only affects a single plant or industry 
that has no market, the plant may be so ar- 
ranged that a new product can be produced, 
for which there is a market. In that case the 
panic will soon disappear. 

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Economics 

A railroad, opening up a new territory, of- 
fers inducements for people to settle in that 
territory. As the population increases the 
amount of traffic for the railroad increases 
and other business can increase in proportion, 
thus causing the panic to disappear. 

A severe panic of short duration may be 
caused by adverse legislation; usually when 
the legislation is adjusted the panic disap- 
pears. The severest of all panics are those 
created by natural causes. When natural 
causes are involved, conditions have to read- 
just themselves. 

Very often this readjustment has to take 
place along entirely new lines and may cause 
widespread and serious disaster for a long 
period of time. 

Strikes: — A strike is a severing of work- 
ing relations between a corporation and its em- 

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Economics 

ployees. The cause of strikes is a sociological 
and not an economic condition. About the 
only economic condition, that needs to be con- 
sidered in regard to strikes is: — during a 
strike, who are the losers ? As an illustration, 
we will use a street car strike. There are 
three elements that need to be considered. 
The traveling public, the operating company, 
and the employees. Under normal conditions 
these three elements combine and the public 
has service, the company has an income and 
the employees have work or labor. 

During a strike these three elements separ- 
ate into three separate units or conditions. 
The traveling public is one unit or condition; 
the operating company is another unit or con- 
dition ; while the employees form a third unit 
or condition. During a strike, the traveling 
public is subjected to inconveniences and these 

200 



Economics 

inconveniences are expensive. But, to com- 
pensate for this loss, there is a daily saving of 
the entire street car fare. That is, if the street 
cars do not run the public have no chance to 
ride on the street cars and do not need to 
pay street car fare. Hence, with the public, 
the gains and losses are about equal. 

The operating company loses its income, 
but it saves its operating expenses. That is, 
when the employees are on strike they receive 
no pay ; but, the equipment of the company is 
lying idle. Hence, barring violence or de- 
struction of property, about all the company 
loses, during a strike, is the interest on the 
cost of its equipment. 

The employees are dealing with the element 
of time, and the wheels of time move forward 
but never backward. Hence, time once lost 
can never be recovered. If by striking, the 

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Economics 

employees gain an increase in pay, eventually 
they may regain their losses. As an illustra- 
tion, the employees are receiving two dollars 
per day and by striking their pay is increased 
to two dollars and ten cents per day. Then 
the employees must regain their lost time at 
the rate of ten cents per day. That is, if the 
employees had continued at work, every day 
they would have received two dollars. During 
the days they strike, they receive no pay ex- 
cept the increase in pay at the end of the 
strike. Hence, the strikers pay, per day, is 
the increase in the daily wage divided into the 
former daily wage. In the conditions stated, 
for every day the employee strikes he must 
work twenty days to recover his losses. If he 
receives no increase in pay his losses are per- 
manent. 

In character, all strikes are similar to the 

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Economics 

illustration given. In the case of mines or 
fuel supplies, some distant city or steamship 
company may be the purchaser. If the mine 
is the main industry in the community, since 
the mine is deprived of its income all business 
in the community must suffer. Since a strike 
deals directly with the finances of a commun- 
ity, a strike of long duration will always dis- 
arrange business conditions. 

Wars: — War is a condition from which 
the inhabitants of the earth have never yet 
been able to escape. With the savage, war 
was a constant condition. The true savage 
obtained his food from such stores as nature 
provided. To deprive him of food was to de- 
prive him of life. Hence, each savage was the 
natural enemy of every other savage. With 
the savage, war had but one serious stage, 
that was during its existence. If any prep- 

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Economics 

aration was made the preparation was made 
in an instant. The savage knew nothing of 
repairing the damage done by war or a recon- 
struction period. Might was right, that was 
the law and government of the savage. The 
savage was a child of nature, he knew no 
sense of ownership consequently he knew no 
theft. 

The semi-civilized man, when he domesti- 
cated the animals, not only increased the 
causes of war but he also increased the effect 
of war. While the savage knew no sense of 
ownership, the semi-civilized man established 
a sense of ownership, consequently he knew 
the meaning of theft. One of the principal 
causes of war, among semi-civilized people, 
was the stealing of each others herds. War, 
now had two serious conditions. First, the 
disasters or calamities that might happen while 

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Economics 

the war lasted ; second, the reconstruction pe- 
riod. War would scatter his flocks and herds 
but if successful, in war, he might again be 
able to regain his flocks and herds. If unsuc- 
cessful in war, he was compelled to gain other 
flocks and herds, seek other means of obtain- 
ing a livelihood, or perish. 

When man established a government to pro- 
tect and regulate affairs, the causes for war 
were greatly increased and the effect of war 
was again increased. 

To the civilized man, war has three serious 
periods or stages. The period preceding the 
war ; the period during the war and the period 
following the war, or the reconstruction pe- 
riod. History shows that generally, the causes 
of war are long standing and eventually war 
ensues. 

Actual war develops several conditions that 

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Economics 

need to be considered. First, is the actual 
loss of property and human life. While that 
loss is serious, logically, it seems to fall more 
heavily upon the conditions that existed pre- 
vious to the war and tends more thoroughly 
to blot out those conditions. Another condi- 
tion that war implies is the changed relations 
of the working forces. Armies are consumers 
but not producers. Another condition pro- 
duced by war is the shifting of the financial 
relations. Wars always have necessitated the 
borrowing of large sums of money. At the 
end of the war, generally, this money is all 
in the hands of the producers and the prin- 
ciple producers, during every war, are the 
farmers. 

The war being over, the next step is the 
reconstruction period. The first step, in the 
reconstruction period, is to throw all the 

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Economics 

larmies out of employment. The discharging 
of the armies, likewise destroys the markets 
that were used to supply these armies. The 
destruction of markets entails a stagnation in 
financial affairs and stagnations, in financial 
^affairs, are the cause of panics. Hence, it 
follows, as a logical conclusion, that the first 
thing, to be expected, after the end of a war, 
is a panic. Another condition, to be ex- 
pected, is the repudiation of debts. A con- 
quered or defeated nation bears about the 
same relation to nations that a dead 
person bears to society. When a man dies and 
leaves debts, if he leaves sufficient property, 
the debts are paid. If he leaves no property 
there is nothing with which to pay the debts. 
The same conditions seem to exist between 
nations. When a nation passes out of exist- 
ence, generally, there is nothing left with 
which to pay its debts. 

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Another condition, that the Reconstruction 
Period develops, is the changed relations that 
the war causes between the working forces. 
During the Forties and Fifties, the Southern 
Planters, undoubtedly, would have laughed 
you to scorn, if you had told them that pine 
trees would yet grow in their cotton fields. 
Under the condition of Slavery, as it existed 
in the Southern part of the United States pre- 
vious to 1860, the country could produce vast- 
ly more than it could consume. The general 
condition of labor being that the slave per- 
formed the physical part of the labor and the 
master performed the intellectual part of the 
labor. When war severed this relation of 
labor and the master and the slave each man- 
aged his own affairs, the production of the 
country diminished. The slave, unassisted by 
the intelligence of the master, was not intel- 
ligent enough to manage the plantations and 

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the master, without the assistance of the slave, 
was not, physically, strong enough to perform 
the labor required. 

Observation shows that wars may be the 
gasps of a dying nation or they may be the 
pangs of birth of a new nation. History 
shows that when nations are born they bear 
much the same relation to nations that an in- 
fant bears to humanity. They may become 
strong and powerful, but it takes time to de- 
velop them. A mill cannot be run with the 
water that is passed, neither can a nation be 
rebuilt with the property and lives destroyed 
during a war. In the Reconstruction Period, 
new forces must be set to work, new material 
acquired. Very often these new forces and 
new materials must grow from old conditions, 
so that in Reconstruction we may expect a 
slow tedious process. 

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CHAPTER XVIII. 
Conclusion. 

The workings of civilized man have set in 
motion the laws of nature. In our study we 
have seen that the laws of nature may cross 
each other ; branch like branches of a river, or 
play hide and seek with each other. They 
may advance and recede like the waves of the 
ocean. They may glitter and sparkle like the 
rainbow or they may advance with the force 
and fury of the thunder cloud. In her deal- 
ings with man, nature may be as kind and as 
invigorating as the sunshine ; as soft and gen- 
tle as the Spring rain ; or as fierce and savage 
as the lightning that darts from the thunder 
cloud. 

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In the law of Decreasing Returns or the 
Law of Material, the earth not only gives man 
of the fish which swim in the water; of the 
birds which fly through the air ; of the beasts 
which roam over the plains; of the forests 
that clothe the mountains ; and of the fertility 
of the soil; but she allows man to tear great 
gaps in her side and gives him of the miner- 
als, that she hides in her bosom. In the Law 
of Constant Returns, or the Law of Trans- 
formation, nature will transform the energies 
of man into engines that fly through the air; 
ships that plough the seas ; trains that run over 
the land; cities that stand on the earth; or 
bending orchards and fields of grain that dot 
the landscape. In the Law of Material, man 
must accept what nature gives, but nature will 
give until her supplies are exhausted. In the 
Law of Transformation, nature will give man 

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what he wants, provided man pays nature's 
bill. Nature will transform man's energy into 
food for his table; clothing for his person; 
a home for his dear ones; vehicles for pleas- 
ure; or implements of destruction, to be used 
in destroying his fellow man. 

When it comes to the Economic Law of In- 
creasing Returns, or the Economic Law of 
Production, nature demands her pound of 
flesh to the last ounce. When her bill is due, 
it matters not to nature, whether it takes man 
a day or a century in which to pay it. It mat- 
ers not to nature, whether the bill must be 
paid by unborn generations, by the babe who 
sleeps in the cradle; by the man in the prime 
of life; or by the gray haired sire who is tot- 
tering on the verge of the grave. In the Eco- 
nomic Law of Increasing Returns, whenever 
nature's bill is due, pay man must and pay he 

will. 

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What toll nature will exact from humanity 
for the warlike conditions that exist today, 
only future generations will know. 

The End. 



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